Best type of account to save for a house?

JessCM9

So I currently have a LISA sitting at around 20,000, however I don't think I'm going to be able to buy a house for the £450,000 limit. Is it worth me continuing to pay into this account, and if not, what's the best sort of savings account to save my deposit in? A cash ISA? 

Bigwheels1111

I like many on here are big fans of regular savers,
But you would pay 20% or 40% tax on them depending on your salary.
So an ISA is your best bet.

moneysaver9099

Another vote here for an ISA. Checkout which cash ISAs offer the best interest rate right now on MSE's website. 

clairec666

JessCM9 said:

So I currently have a LISA sitting at around 20,000, however I don't think I'm going to be able to buy a house for the £450,000 limit. Is it worth me continuing to pay into this account, and if not, what's the best sort of savings account to save my deposit in? A cash ISA? 

If you think it's very unlikely to use the LISA for a house deposit, then any extra money you put in would be practically locked in until you are 60, unless the withdrawal rules are made more fair (i.e. taking a 20% hit instead of 25%). You would be better off saving into a cash ISA.

SFCooper

Bigwheels1111 said:

I like many on here are big fans of regular savers,
But you would pay 20% or 40% tax on them depending on your salary.

Could you elaborate on this please?

I’ve just opened up the Lloyds 6.25% RS for £400 p/m

JessCM9

Bigwheels1111 said:

I like many on here are big fans of regular savers,
But you would pay 20% or 40% tax on them depending on your salary.
So an ISA is your best bet.

So would you recommend I stop paying into my LISA then as the house prices of the properties we're looking at are over the £450,000 upper limit?

eskbanker

JessCM9 said:
...the house prices of the properties we're looking at are over the £450,000 upper limit?

That £20K in the LISA becomes £15K if you withdraw it without buying a property within the £450K limit (unless you can leave it there until you're 60), which is a significant hit, so is there any scope to lower your sights a bit?

Obviously there are the arguments that the limit was set quite a while ago and that the withdrawal penalties are punitive, but that's where we are....

JessCM9

eskbanker said:

JessCM9 said:
...the house prices of the properties we're looking at are over the £450,000 upper limit?

That £20K in the LISA becomes £15K if you withdraw it without buying a property within the £450K limit (unless you can leave it there until you're 60), which is a significant hit, so is there any scope to lower your sights a bit?

Obviously there are the arguments that the limit was set quite a while ago and that the withdrawal penalties are punitive, but that's where we are....

I'd most likely look to leave that money in the lisa for retirement. Then pay my savings into a cash ISA? The problem is the house prices are continuing to rise and we cannot get a property for our family below the £450,000 mark, and I'm not sure how much higher that will be in 4 years time when we will be looking to buy. 

eskbanker

JessCM9 said:

eskbanker said:

JessCM9 said:
...the house prices of the properties we're looking at are over the £450,000 upper limit?

That £20K in the LISA becomes £15K if you withdraw it without buying a property within the £450K limit (unless you can leave it there until you're 60), which is a significant hit, so is there any scope to lower your sights a bit?

Obviously there are the arguments that the limit was set quite a while ago and that the withdrawal penalties are punitive, but that's where we are....

I'd most likely look to leave that money in the lisa for retirement. Then pay my savings into a cash ISA? The problem is the house prices are continuing to rise and we cannot get a property for our family below the £450,000 mark, and I'm not sure how much higher that will be in 4 years time when we will be looking to buy. 

Fair enough - if you can afford not to access that £20K when buying your first property then leaving the money in the LISA is undoubtedly an option.

For new saving, I'd always recommend looking at maximising net return rather than simply trying to avoid tax, so one or more ISAs might be suitable, but much will depend on how much tax you'd actually pay on non-ISA accounts, given the allowances you have.

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
https://www.moneysavingexpert.com/savings/best-cash-isa/
https://www.moneysavingexpert.com/savings/tax-free-savings/