Best interest rates, but money still available?

[CAMRAMan]

Moving to the UK, so I have about 225K Pounds to fund a property. I was thinking of buying, but I'm now looking at renting for a year and hoping that the house market returns to more realistic prices. Sellers seem a bit reluctant to sell for what I'm prepared to offer.

If I do that, I'd like to have the money in an account that attracts >6% interest, but I'm still able to use it to pay bills, etc. I seem to recall seeing that one High Street bank had a premium current account offering 8%. Anyone know which one?

Alternatively, does anyone know of any other (safe) investment where I can get the interest paid monthly to an account of my choice and be accessible after a year?

[tiermat]

Santander (Abbey are offering 8% at the mo)

And wait around a bit, the housing market is only going to go one way in the near future, and that is down...

[border-rider]

We're in a similar position, having recently sold Volio Towers, and are taking at least a year out of the housing market, so I'm watching this thread with interest.  As it were.

The other issue to consider is security - there are some good deals around, but be aware that only the first £30k is protected if the bank goes tits-up in a Northern Rock-almost stylee.  We've so far left ours in a well known and likely stable building society, but would be happy to split it up a bit.

[CAMRAMan]

My money is currently in Euros, so that's a factor to consider. Once plans get firmer and assuming the rate is favourable, I'll transfer to Pounds.

The security thing is a concern, and I heard the 30K limit was going to be raised to 50K. Ideally, one account is better for admin reasons.

Abbey/Santander is safe, isn't it?

[Greenbank]

My money is currently in Euros, so that's a factor to consider. Once plans get firmer and assuming the rate is favourable, I'll transfer to Pounds.

The security thing is a concern, and I heard the 30K limit was going to be raised to 50K. Ideally, one account is better for admin reasons.

BBC NEWS | Business | Q&A: Deposit protection plans

[border-rider]

Isn't it the case that the Govt has guaranteed 100% of all savings in Northern Rock ?  That makes it rather unique, and I am contemplating moving some money there.

[Polar Bear]

I think I'd be looking to spread that amount of money amongst a few institutions just in case ...

[Greenbank]

Your money may be guaranteed to £35k, but don't expect instant access if things do go tits up. Think more along the lines of months. And months of no interest probably.

In general, find an IFA and discuss options with them.

[border-rider]

Your money may be guaranteed to £35k, but don't expect instant access if things do go tits up. Think more along the lines of months. And months of no interest probably.

In general, find an IFA and discuss options with them.

What would an IFA tell you that a reading of the current rates/lockin terms as provided by Sunday papers wouldn't ?

(Not having a dig, just interested...)

[Greenbank]

What would an IFA tell you that a reading of the current rates/lockin terms as provided by Sunday papers wouldn't ?

(Not having a dig, just interested...)

Experience, advice and an up-to-date database of thousands of such investment products, rather than the tens listed in Sunday Papers.

[border-rider]

Aye, but if what you need is a building society account paying monthly interest with instant/1 month/60 day/90 day notice then it's just a matter of looking who's offering the best rate for the term you want, isn't it ?

If I were looking at long-term investment then I'd go to an IFA for sure

[Greenbank]

Aye, but if what you need is a building society account paying monthly interest with instant/1 month/60 day/90 day notice then it's just a matter of looking who's offering the best rate for the term you want, isn't it ?

If I were looking at long-term investment then I'd go to an IFA for sure

Abbey 8% account for example? You only get that on the first £2,500. After that it's either nothing or something pitiful below 2% AER.

Abbey's eSaver Direct looks good but the small print shows that making a withdrawl drops the interest rate for that month.

This leaves their eSaver account. Limited to £200,000 (not so much of a problem) and up to 5.80% AER.

Sure you can look for yourself, but personally with that sum of money, and those short/medium term goals, I'd be looking to someone who does this kind of thing as a job.

[border-rider]

Hmm

We're getting 5.05% now on the whole amount with instant access (and it's a lot more than 200k) so maybe I'll leave it where it is

[cometworm]

[Get thee to an IFA! The below does not constitute investment advice, etc etc]

Think carefully before you put all your money in one bank - in this economic climate I wouldn't risk losing the majority of your cash if the bank goes belly up, and having to wait ages to get the minority that is guaranteed. Spread your cash among several banks. Santander is probably not a bad idea, as it is is geographically well diversified; HSBC is another.

The "great" savings rates you get from some banks are generally 1) a sign of despair on their part (think IceSave, part of an Icelandic bank...) 2) too good to be true, and 3) only a good deal up to the guarantee limit.

Other "safe" investments you could put the majority of the money in (leaving the rest in an accessible account for bills etc) are pretty much restricted to government bonds or liquidity funds.

[border-rider]

[Get thee to an IFA! The below does not constitute investment advice, etc etc]

Think carefully before you put all your money in one bank - in this economic climate I wouldn't risk losing the majority of your cash if the bank goes belly up, and having to wait ages to get the minority that is guaranteed. Spread your cash among several banks. Santander is probably not a bad idea, as it is is geographically well diversified; HSBC is another.

Conversely: the wider you spread it the more risk there is of one or more of the banks you chose failing

At the moment it's all in one fairly safe institution - one which I suspect would be amongst the last to the wall - and I think that's safer than spreading it over 20-something less safe ones.  The alternative as I said was NR

I still don't see anything to consult an IFA about - it's a matter of looking at available rates and what the relative risk is.   I'm risk-averse so it'd have to be a better rate than we have, with an organisation at least as safe long-term.  It doesn't look as if that's do-able.

[cometworm]

The only banks I would trust right now are the ones who can print their own money - and I don't mean that funny Scottish money either. If you spread the amount across enough banks to stay under the threshold for the deposit guarantee scheme, you are in essence banking with the BoE.

[border-rider]

Or Northern Rock

[rae]

There's an argument here to be made about reality.  There are some vulnerable banks out there, in order:

B&B - toast, get out while you still can, have you seen the share price.....
A&L - vulnerable, same issues as B&B
HBOS - not very vulnerable, but in a fair amount of trouble.

I would argue that if any or all of the above fail, the same protection as NR would kick in.   Failure to do so would result in a much wider banking collapse as everyone puts cash under the mattress.   The government will do everything in their power to prevent this, up to and including just printing the cash.

There's a group of less vulnerable UK banks which can be summed up as "the rest of them", HSBC being the strongest of the lot.  These are the big boys where an NR style rescue might not be possible.   On the flip side, if any of these let go, then it's good night, game over, end of the financial world as we know it.   So it doesn't matter.  If we were in a situation where, say, Barclays or HSBC failed the fact that you had your cash in the Nationwide would be irrelevant as your cash would be a string of numbers, nothing more. 

Summary:

Stay out of Iceland and the vulnerable banks.  Everything else is OK.    Inflation is your bigger enemy as it is currently dissipating your savings at about 7% per annum assuming you are getting 6% interest and paying 40% tax on it.

[border-rider]

Summary:

Stay out of Iceland and the vulnerable banks.  Everything else is OK.    Inflation is your bigger enemy as it is currently dissipating your savings at about 7% per annum assuming you are getting 6% interest and paying 40% tax on it.

That's my take also, with the exception that my big stack of cash will be used to buy a house in a year or so, so as long as the price of houses falls wrt our savings, we're OK

[rae]

Depends what you want in the way of a house.   Generic two a penny things will tumble by more than people think.  Things that are unique still have multiple cash offers on them and fly off the shelves in a week. 

Ob disclosure: we're in the process of buying something in the latter category.  I'm not sure the inflation/HPI reversal adds up in this category, hence I'm buying now.   Don't really care, hopefully I'll be there for a long time.

[border-rider]

Aye, it depends, but people read the papers and watch TV.  No-one is rushing to put their hand in their pockets right now even for quality stuff.  Why would they until they can see how things pan out ? Even for the fabled unique stuff, there's no rush, prices won't go up from here.  Net result: low interest, no offers, downwards pressure on houses.

Also: who's going to buy them ? OK, at the £nm level it's irrelevant, but most mere mortals have to sell something to buy the next one, and if all down the chain prices are dropping it affects the stuff at the top

I'd agree though that if you see something unique and worthwhile at the right price, there's not a lot of point waiting.  It's the right price thing that's the  issue.

[Adam]

Speaking as an IFA, one point to also consider when spreading your dosh between financial institutions, if you are concerned about a forthcoming financial melt down with banks/building societies going belly-up, is to beware of companies which are owned by a bigger company.

Unless the subsidiary has its own FSA registration, then you'll only be covered for (currently) £35,000.  So for example if you've got £35,000 in Birmingham Midshires and £35,000 in Bank of Scotland, as BoS own BM and they share the same FSA number, if they both go bust, you'll only get £35,000 back. 

Tesco Finance on the other hand, which is owned by Royal Bank of Scotland does have its own FSA number, so if you had money with both, you'd be protected up to the limit on both accounts.

Every little helps. 

[cometworm]

Adam, Thank you, that is helpful to know. As I have three bank and building society accounts, do you know how or where would I find each company's FSA number?

FSA Register

[Andrew Br]

Very interesting stuff.
I'm in the same position as MV- a fair amount of money in the bank which will be the deposit on a house.
I'm holding off buying 'cos I think prices have some way to fall yet.
Currently the money is with HBOS and A&L (neither of which appear to be the most stable- bugger) and I put £30k into Premium Bonds.
So far it seems that the Premium Bonds are the best investment- if I've calculated it correctly, I've grossed* 8.2% tax free from the winnings.

*Not taking into account the loss of interest if the money had been invested "conventionally".

Is it just me or does looking after finances create lots of stress ?
And do you ever know if you did the right thing ?

[andrewc]

In view of the current problems with mortgage lenders & banks I'm getting mildly paranoid about my savings. 

I've got about £25k in an Icesave account^*,  this is planned as deposit for another flat/house (current one is paid for).

A couple of people here and on other sites have commented that the Icelandic banks are not a Safe Place for my dosh so I'm thinking of moving it.

Any suggestions for a safe, easy access account with decentish interest ?

 My current account is First Direct (HSBC) but their best account only pays 4.65%.  I've used Egg in the past, they are currently offering 6.3% on one of their accounts but are owned by Citigroup who seem to be getting hit hard in the US mortgage market.

Northern Rock offer 6%, would they be a decent bet now they are effectively owned by the government ?

^* Mostly in a regular savings account. £3600 in an ISA.