Is it safe to keep house buying funds in stocks and shares ISA?

Nsq89

I can’t work for the foreseeable future , and my mother has offered to buy me a house outright. She has about 55% of the funds needed in a stocks and shares ISA, and the rest in various savings accounts. She has other savings for herself and a decent pension to live on. She did have a financial adviser a few years ago but I don’t think she’s had much advice recently. The ISA is down about 13% from pre Covid and part of it is temporarily frozen (only about 10k) . I’m concerned that this ISA is in an exposed position if the economy tanks, which seems quite possible to me. Although I don’t know when I will find a place and get an offer accepted, the market is crazy where I live. Should my mother be cashing in all of that stocks and shares ISA as soon as possible? Or is this just locking in losses from the last 6 months? I really need to move within the next year or so, sooner the better. Any advice appreciated

Notepad_Phil

You've not put what the investments are, but given that her ISA investments are down 13% then I think it is fair to say that it is likely to contain a lot of equities and so could fall quite significantly over a shortish period and remain low. So if it were me then I'd be out of the stock market ASAP and think myself lucky that the markets have managed to regain as much as they have.

Investments are for the long term (i.e. 10 years or more) and you would ideally be out of them and in cash years before the cash was actually needed.

AnotherJoe

Safe, no.

Prudent, definitely not.

Nsq89

Notepad_Phil said:

You've not put what the investments are, but given that her ISA investments are down 13% then I think it is fair to say that it is likely to contain a lot of equities and so could fall quite significantly over a shortish period and remain low. So if it were me then I'd be out of the stock market ASAP and think myself lucky that the markets have managed to regain as much as they have.

Investments are for the long term (i.e. 10 years or more) and you would ideally be out of them and in cash years before the cash was actually needed.

The bigger funds are:

Premier UK Growth-U
Jupiter Income Trust-U
Liontrust Global Income-U
Schroder UK Mid250-U2
Invesco Monthly Income Plus (UK)-U2 (Inc)
Fidelity Global Special Situations -U (Acc)
Fidelity Special Situations -U (Acc)


There are a dozen other smaller ones

album_song

If you intend to use that money within a year it really shouldn't be invested.
That said, you could take the 45% cash as a deposit, get a mortgage on the rest and let mum keep the investments to pay for care, rather than you both having to sell your houses, arms, legs and sanity to pay for it 🤷‍♂️

Malthusian

album_song said:

If you intend to use that money within a year it really shouldn't be invested.
That said, you could take the 45% cash as a deposit, get a mortgage on the rest...

"I can’t work for the foreseeable future" will probably scupper that.

When you say "buy me a house outright" do you mean give you a house or buy a house herself and let you live there rent-free? The latter may be better when it comes to means-tested benefits.

How soon do you think you will find a house? If it's just a matter of picking one in the next few months it's a pure gamble for it to be in anything but cash. If it might take a few years it's a trickier decision, because rising house prices could erode the value of the cash significantly.

(If the economy does tank completely house prices most likely will as well - although you will have to be less picky if you want to buy a house in a distressed market because only the desperate, like bankrupts and deceaseds' estates, will sell.)

If you are not going to be tied by work, do you really want to buy a house in a "crazy market"?

Nsq89

Malthusian said:

album_song said:

If you intend to use that money within a year it really shouldn't be invested.
That said, you could take the 45% cash as a deposit, get a mortgage on the rest...

"I can’t work for the foreseeable future" will probably scupper that.

When you say "buy me a house outright" do you mean give you a house or buy a house herself and let you live there rent-free? The latter may be better when it comes to means-tested benefits.

How soon do you think you will find a house? If it's just a matter of picking one in the next few months it's a pure gamble for it to be in anything but cash. If it might take a few years it's a trickier decision, because rising house prices could erode the value of the cash significantly.

(If the economy does tank completely house prices most likely will as well - although you will have to be less picky if you want to buy a house in a distressed market because only the desperate, like bankrupts and deceaseds' estates, will sell.)

If you are not going to be tied by work, do you really want to buy a house in a "crazy market"?

Thanks. A first home isn't counted as capital by DWP if you live in it. I would like to move as soon as I can, i just need to find somewhere suitable. Most people seem to say to sell the ISA to secure the cash, though somebody suggested she keeps as much in the ISA as possible, reallocates it to non UK funds, and pays the rest with cash savings, since the ISA will give a better return by the time she might need care. This sounds risky to me. Either way should my mother contact a financial adviser about this?

Albermarle

Either way should my mother contact a financial adviser about this?

That's down to personal choice . The advice will probably be useful but it will not be cheap. Normally they want to 'take over ' the investments and charge you a % each year for managing them .

since the ISA will give a better return by the time she might need care. This sounds risky to me. 
Any investments in stocks and shares are potentially at risk of going down , as you already know . However history shows that in the long term the trend is up. The problem with cash savings is that the interest lags behind inflation so the savings gradually lose value/buying power. So that is a risk in itself.

MovingForwards

How old is your mom?
Does she own her own home?
If she buys this house for you, how much money will she have left?

Nsq89

MovingForwards said:

How old is your mom?
Does she own her own home?
If she buys this house for you, how much money will she have left?

75, good health, owns house, 175k savings plus pension