'Best' Fixed-rate Account with Minimal Penalties

Saga

I have a modest amount of mortgage deposit savings in a HTB Isa and NS&I income bonds.  The fact is that, despite looking for ages, my property search is such that history says the probability of me finding somewhere, while non-zero, is low.

With the impending cut in rates for IBs, can anyone recommend a fixed-rate savings account with a comparatively decent rate to transfer monies from my IBs account but with the least punitive penalty for withdrawing without sufficient notice in the rare event that I did find somewhere and needed access to the deposit funds asap?

bowlhead99

As the income bonds are moving to a small fraction of what they currently pay, you won't find another 'instant access' product to replace them at the same rate. 

However, NS&I's premium bonds are pretty good if your 'modest amount' is in the several thousands or ideally five figures.  For example if you put £10k into premium bonds, with 'average luck', you could probably expect to win 3 or 4 prizes a year at £25 each which would be 0.75-1% return on the £10000.  Unfortunately if you only had £1k and tried the same thing, you would expect to win 0.3 or 0.4 prizes a year, i.e. nothing in the short term, which would be 0%, although you might get lucky and win something.  It is pretty much a long-shot gamble for small 'modest' amounts, but with bigger 'modest' amounts of £10k, £20k, £30k you would expect average luck to give you an average rate of prizes better than pretty much all short-notice access savings accounts. Some people are more modest than others.

If you think it will be ages and ages before you get round to buying anything (more than about 18 months), and you're under 40, you could consider moving money into a Lifetime ISA account; they often pay more than normal accounts (Nottingham BS is at 1% ish) and in that timeframe you could put enough into the LISA to make £3k of bonus which you're currently only able to get with the maximum £12k deposited in a LISA. And you can keep adding £4k a year as time goes on until you eventually find something you like. 

If you wouldn't be likely to keep the account very long, probably best not to use it as there's a penalty for withdrawing money if not to buy a qualifying property (or post-60 years old).

Saga

Thanks.  I'm over 40yo and have a few tens of thousands in IBs.  I know no-one has a crystal ball, but what is the likelihood of the prizes for PBs being cut?

eskbanker

Saga said:

Thanks.  I'm over 40yo and have a few tens of thousands in IBs.  I know no-one has a crystal ball, but what is the likelihood of the prizes for PBs being cut?

100% - they reduce in December!

The prize fund as a percentage of the total bonds held will drop then from 1.4% to 1%, but that's still competitive with easy access savings, especially if the tax-free status of PB winnings is relevant to you.

Saga

OK. thanks