Advice on fixing savings – buying a flat soon

Lexale

BooJewels said:

As the difference between the interest rates of fixes and easy access accounts is so modest at the moment at less than 1% - I personally don't think I'd take that risk - just in case the perfect property comes along and they want to move fast.  It can happen, I just sold an estate property to a renter keen to move ASAP and it was done very fast by current standards - I think it was a day over 10 weeks from viewing to completion - and he had a 3 week holiday in that which did delay matters.  

Even if you had £100k as a deposit, 1% difference in interest for 4 months is a bit over £300 (£50k would be £166 difference) - is that worth the risk?  You'd earn over £1,600 on your £100k deposit in easy access in 4 months at 5-ish%, so that will nicely cover some of your moving-in expenses - plus it's almost certainly more than you've been earning on the fix for the last year.

Hi BooJewels,

Thank you for your reply! That's a solid point of view and I take your point on board. That's a very quick completion I must say. I suppose I've always just assumed buying a property is a ludicrously lengthy process but it doesn't have to be that way always. As you say, if I get a cooperative seller and all goes well, I could well be left hanging with cash tied up. If they then pulled out I'd be left with sunk costs and a frustrated seller. If my deposit is liquid, contracts can be exchanged and the seller then can't back out (nor me). 

You are right - my previous fix earned me 4.1% for 1 year, taken out just before the Liz Truss drama.

I appreciate your perspective and advice!

Lexale

BooJewels said:

grumbler said:

Altior said:

...mentioned the difference to easy access is marginal,...

BooJewels said:

As the difference between the interest rates of fixes and easy access accounts is so modest at the moment at less than 1% ...

I think the OP's concern was that, unlike fixed-rates, easy-access rates can plummet, not that they are a little lower. 

Understood - I suppose was downplaying that concern in my mind as it feels as though the consensus here is that rates are fairly stable just now and there are not expected to be any drastic changes in the immediate future.  Ironically, it's EA rates that are holding their own best just now, when fixes have been falling a little in the last few weeks - and a lot withdrawn.

Some of the EA accounts have to give you 30 or 60 days notice before dropping interest rates, so maybe something of that nature would suit the OP's time scales - like the Cahoot Simple Saver at 5.12% (5% monthly) that has to give 60 days notice before a decrease.

Thank you for this Cahoot saver! Looks like something that offers a decent margin of certainty and time to shop around if rates tanked, perhaps even just to get a 3-month fix. I'll have a search around and see which offer the best rates with the longest notice periods.

Lexale

Altior said:

grumbler said:

Altior said:

...mentioned the difference to easy access is marginal,...

BooJewels said:

As the difference between the interest rates of fixes and easy access accounts is so modest at the moment at less than 1% ...

I think the OP's concern was that, unlike fixed-rates, easy-access rates can plummet, not that they are a little lower. 

Indeed, but since they will need to access the funds in the short term for a property purchase, it's not worth fiddling around the edges to 'nick' a few ticks of interest, at least in my view. If there was a prospect of a percentage point or more difference, perhaps, but that is quite unlikely. 

The process of buying would need to complete before May 2024 such that the accessibility of my funds would inhibit the transaction.

Thank you Altior,

On reflection, I am inclined to agree with you, especially since I found out that the deposit is required to exchange contracts, not prior to completion as I mistakenly believed. If the money tied up was preventing contract exchange, this could lead to us getting gazumped or losing our sunk costs of valuation costs, surveys, solicitor checks on property history etc. The risk for a few hundred quid extra interest just isn't worth it. I think I'm going to do a 3-month fix or have an EA account with a notice period for interest rate drops and then re-evaluate once we're closer to the purchase. Your contribution is appreciated

Zerforax

With certain banks (for example Halifax) you can apply for a mortgage with just a contract of employment/first payslip so you might not have to wait until you have 3 months worth of payslips?

Albermarle

With the Cash ISAs, I think this would be great for a longer term but if the penalties are 90 days interest, that reduces the effective interest rate quite sharply. 

Just to be clear a Cash ISA can be an easy access account, or a notice account, or a fixed rate/term account.

Just the same as with savings accounts that are not held as a cash ISA.

The difference with the fix term accounts is that an ISA one has to let you have early access if you need it, whereas only a few non ISA fixed term accounts allow that . Plus in both cases there will be penalties

phillw

BoE base rate is projected to stay constant for another year.

If someone catastrophic happens to change that, then the loss of interest is unlikely going to be your biggest problem.

LZC

Having been in a similar position recently I’d just keep them in accounts you can access. I’d look at a combination of a cash ISA, regular savers (to drip feed into) and easy access accounts that can all be accessed without penalty. 

You’ll just find yourself in the same position in 3 months’s time anyway. It’s really hard to judge how long it will take. 

If you go down the regular savers route try and open and fund them today if you can (you might need to already have an account with them) so you can then double up tomorrow as well.