Cash LISA for first time buyer

glassposter

Looking to open a cash LISA. Money box interest is 4.8% AER (variable) for the first year, and drops to 3.8% after this. Whereas Tembo is 4.75% AER (variable) and the website says no drop off after one year. Recently saw Martin recommend Moneybox however considering Tembo doesn’t have the drop off after year one surely Tembo would be better, or am I missing something. I am only looking to put £1 at the minute as I’m at university so not earning enough to put lots of money in, just want to open the account so when I do earn enough I can get the 25% straight away. What do people recommend?

eskbanker

I'd go for the higher current rate and continue to review options both during and after a year, but the difference between 4.8p and 4.75p really isn't significant!

Albermarle

Both have variable interest rates so they could both change at any time.

glassposter

Moneybox says it drops to 3.8% after a year whereas Tembo says there is “no drop off after one year” so would Tembo be the better one to go with? Or is it likely to drop off at some point close to a year and they’re being sly with the wording? 

eskbanker

glassposter said:

Moneybox says it drops to 3.8% after a year whereas Tembo says there is “no drop off after one year” so would Tembo be the better one to go with? Or is it likely to drop off at some point close to a year and they’re being sly with the wording? 

I don't think you're really understanding the propositions - Moneybox's rate includes a fixed 1% bonus on top of the 3.8% underlying rate, so that's why they project that the paid rate will definitely drop after a year, whereas Tembo's rate doesn't include a temporary bonus uplift, but they're both variable rate products, so they could both change during the course of the year.  Hence my recommendation to start with what's currently highest but to keep an eye out for changes, if you've accumulated enough of a balance for that to be significant....

glassposter

Thank you, I understand this now