Newcastle Property Options Bond

womblingfree_2 · 24 November 2004 at 8:06PM

Hi

I am thinking about investing this year's mini cash ISA allowance in the Newcastle's Property Options Bond. Does anyone have any views on this product? More info at

http://www.newcastle.co.uk/

I realise there is a separate ISA board but this can be held as a normal savings product or as an ISA. I am really just interested in whether people think it is a good bet.

Thanks

womblingfree

deemy2004 · 25 November 2004 at 3:11AM

Very distinct product - you can bet on a move up or down !

Though house prices need to move up more than 15% up or down to beat say the 5.4% Derbyshire 2 year fixed rate ISA.

The question is will house prices move more than 15% ?? over 2 years (excluding the current sell off into dec 04).

Its a tough one - as at best your looking at a 20% drop which would give you 15% against an 11% safe return from a fixed cash isa.

At worst house prices move against you and you make nothing , so the risk is 11% for an extra 4% over 2 years. The odds are not that good, for me anyway/

Okay the bet is for an house price fall -

5% drop = 3.75% = Derbyshire 11.1% = -7.35%
10% drop = 7.5% = Derbyshire 11.1% = -3.6%
15% drop = 11.25% = Derbyshire 11.1% = +0.15%
20% drop = 15% = Derbyshire 11.1% = +3.9%
25% drop = 18.75% = Derbyshire 11.1% = +7.65%

So your look at a minimum drop of 15% to equal a fixed cash ISA return. I can't imagine much more than a 15% drop from the Dec 04 figure, so it does not look like its worth the risk of loss of interest.

womblingfree_2 · 25 November 2004 at 4:39PM

Thanks for doing all the sums Deemy. I had calculated the drop would have to be greater than ~15% to make this a better deal than an ordinary ISA which agrees with your figures. The question is what will happen to the market ??? ???

I think I am coming to the conclusion to invest elsewhere.

Thanks again

WF

Newcastle Property Options Bond

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