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I live & work in the UK.

Having pretty much exhausted all of the avenues I can find for saving (none of which have great returns anyway at the moment, obviously), I have recently started looking to buy my first house.

I have a reasonable sum saved up for a deposit, but I'm wondering what to do with that in the mean time, as a fair amount of it is not currently earning any interest. For the moment, I have put any surplus, that I'm not earning interest on into premium bonds, just in the off-chance that I win something with it, but this is obviously more of a lottery than an investment, and I'm not 'expecting' to win anything noteworthy with it.

Ideally, I would like to buy a house within the next year or so, so investing in the stock market is not really an option, as I understand the commonly accepted advice is that you invest with a minimum 5 year horizon.

What other options do I have for any surplus cash while I look for a house?

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  • Would you explain to us ex-colonialists what premium bonds are, and why they are a lottery? – RonJohn Feb 6 '20 at 16:06
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    @RonJohn en.wikipedia.org/wiki/Premium_Bond It appears the interest is paid into a pool to be distributed by a literal lottery, rather than being paid to the bond holder. – chepner Feb 6 '20 at 16:17
  • Does Britain have any internet banks that do pay interest? If not, Canada has at least two, Tangerine and Peoples' Trust. They may or may not deal with you. Another option is 90 day certificates which are available in Great Britain, possibly even at your own bank. – Dan Bracuk Feb 6 '20 at 17:01
  • @DanBracuk There are internet banks, but none of them appear to pay rates that compete with the high street banks. Do the ones in Canada actually pay interest? – Noble-Surfer Feb 7 '20 at 9:20
  • ok, UK may be a problem (pound), but for EUR and USD I get 8% interest rate daily paid, immediate availability in a swiss regulated financial institution. Actually just checked - also on british ;) – TomTom Feb 7 '20 at 17:48
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I am not a financial advisor; this is not financial advise.

As you're in the UK, one option to explore would be a Lifetime ISA (LISA). See Lifetime ISAs on MoneySavingExpert.com or Lifetime ISA on the UK Government's site.

Like other ISAs, the money in a Lifetime ISA can either be cash (earning precious-little interest) or stocks & shares (where returns may be higher, but riskier). However, the advantage of a Lifetime ISA over "ordinary" ISA is that the government will give you a 25% bonus on whatever you invest. If you invest £4,000 (the maximum allowed per year), the government will turn it into £5,000. There are, of course, some catches :-)

Despite the "lifetime" in the name, and that they can be used for retirement savings, I believe the primary purpose is to save towards a first house purchase1. However, they do come with some conditions; the main ones being:

  • You must be 18 to 40 to open a Lifetime ISA.

  • To use it to help buy a house, you must be a first-time buyer who has never owned (in whole or in part) any property anywhere in the world.

  • The property must be a residential UK property costing less than £450,000.

  • You must save for at least a year before using it to help buy a home.

  • If you withdraw money for any reason other than buying a house before you reach 60, you will pay a penalty of 25%. This will, in general, result in an overall loss. (The penalty won't apply if you're diagnosed as terminally ill with less than 12 months to live).


1 Essentially, LISAs have taken the place of Help to Buy ISAs, which were an earlier way to help first-time-buyers. While you can continue saving in an existing Help to Buy ISA (until the end of 2029), you can no longer open a new Help to Buy ISA. The page Help to Buy ISA or Lifetime ISA? on the independent Money Advice Service's website covers the difference between the two.

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  • Thanks for the answer. I opened both a Help-To-Buy ISA and a Lifetime ISA (stocks/ shares) as soon as they became available- and have been contributing the maximum amount to each of them since opening. I will be looking to put these towards my deposit when I decide to put an offer in on a house (I am aware that I can only claim the bonus on one of them). In my OP, I mentioned that I had pretty much exhausted all of the avenues I can find for saving- meaning I'm earning interest on the maximum balance for most of the accounts I can find which actually pay any interest at the moment. – Noble-Surfer Feb 7 '20 at 13:17
  • @Noble-Surfer "all of the avenues I can find" In my defence, I've no way of knowing how hard you looked :-) If you've exhausted all other means, I'd probably stick with Premium Bonds: I've averaged just under 1.5% over the last 7 years, which is about as good you'll get without long-term lock-up, and there's always "that chance". That was with a reasonably substantial holding, but even with a quite modest holding I averaged 1.25% over seven years, although the variance is higher (some years nothing). – TripeHound Feb 7 '20 at 13:42
  • I appreciate you have no way of knowing how hard I've looked/ what I'm already doing- wasn't meant as a dig- no offence intended, just trying to expound the point in my OP, that I have spent some time looking for ways to save that I'm not already using. – Noble-Surfer Feb 7 '20 at 14:02
  • @Noble-Surfer "no offence intended" None taken. – TripeHound Feb 7 '20 at 14:03
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If you are not willing to put it at risk, you cannot expect it to grow. Simple as.

Everything that could potentially beat savings rates involves risk.

For a more predictable return than Premium Bonds, you should look at savings accounts with notice periods, or other restrictions such as only one withdrawal allowed per x (year/months-long period) – these usually offer higher interest rates than easy-access savings.

If you have more than £85k, don't forget this is the threshold for government-backed savings protection per institution, meaning you should spread it across different institutions.

Even if you have less than that figure, you still might consider diversifying your savings across more than one bank/building society – if one fails, it's no use waiting for the government to recompense you when what you actually need is some cash out quickly to use for a house purchase.

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  • oh btw – since you mentioned buying a house – you may already be aware but usually there are significant fees and taxes involved, for which you might need access to your savings. These include but are not limited to: paying your solicitor a bit in advance for conveyancing and searches; paying a product fee for the mortgage deal you want (if it has a fee); paying for a proper survey (or two, if the mortgage lender requires their own and it isn't included); the deposit before you exchange contracts; and of course the dreaded stamp duty, although this is usually paid at the time of completion. – marktristan Feb 6 '20 at 16:45
  • Yes, I am aware of these fees- which is one reason I don't really want to be putting it into anything that has significant risk- I need to ensure that I have enough available to be able to pay these fees & taxes. – Noble-Surfer Feb 7 '20 at 8:59
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Open a high yield savings account.

These accounts offer rates between 1.5% and 2% APY (as of February 2020).

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    Do you have examples of which accounts you're referring to? I suspect I am already using the ones you have in mind... – Noble-Surfer Feb 7 '20 at 9:02
  • Interesting. I get 8% on daily withdrawable funds in a regulated financial institution. In EUR though... Or USD. Or GPB. – TomTom Feb 7 '20 at 17:46
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    1.5% - 2% in the United Kingdom? – carrdelling Feb 7 '20 at 18:39
  • You might get 1.5% - 2% on a fixed term savings account. ie if you can put the money away for several years. But not for anything with easy access. – vclaw Feb 9 '20 at 9:56
  • @vclaw The Santander 123 account (a current account, so easy access) was offering 3% on balances up to £20k for years, though that dropped to 1.5% a couple of years or so ago- and apparently is now due to drop to 1% in May. – Noble-Surfer Feb 11 '20 at 10:58

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