Savings account vs Natwest One Account

tafkam

I am in the position of having just sold my house, and not expecting to buy for another 6 months or so, leaving me with around £20,000 as a deposit to save.

I would like to repay my parents some of the help they gave me when first buying, but they'll hear nothing of a cash sum from that deposit. I'm hoping, however, that they'll accept the interest made while it sits in an account.

I'm just wondering what the best option is. I could put it into a savings account at around 6% which should make me around £600.
Alternatively, my parents have their own mortgage in a Natwest One account - the sort that allows you to add and remove money pretty much as you please. If I persuaded them to "look after" my deposit, they would then benefit from the "interest". However, will that save more than the £600 gained from a standard account?

Presumably it will depend on their respective interest rates, but is it as simple as a direct comparison? e.g. if I can save at 6%, but their mortgage interest rate is 6.5%, then it will be better off in the One Account?

Or is the amount we're talking about hardly worth worrying about?

Baldur

You seem to be forgetting the effect of taxation, £20k at 6% will give around £480 after tax (£600 gross), assuming that you/your parents are basic rate tax payers.

There are easy access savings accounts available at 6.5% AER , which would give roughly £520 after tax and 6 month fixed rate products which offer a slightly higher rate of 6.86% AER or roughly £540 after tax.

If either you or your parents are higher rate tax payers, those amounts would reduce (again roughly) to £360 @ 6%AER, £390 @ 6.5%AER and £405 @ 6.86%AER. So the taxation status of the account holder needs to be considered as well as interest rates, etc.