1 Month
Ask Rachel
Working in the financial industry for over 30 years, Rachel Thrussell is the leading independent expert on UK savings products. Her views are constantly in demand from both the industry and the press.
My parents have given me a few thousand pounds which I think I am going to use to help buy a house sometime in the next couple of years. What type of account should I put the money into in the meantime?
If you are definitely going to buy a house with the money, then you could open a Lifetime ISA or a Help to Buy ISA. These are Government schemes which offer generous bonuses to savers, although there are a number of things that you’ll need to consider first – our guide on Lifetime ISAs should help you decide. However, if there is a chance that you will use the money for something else, then a straightforward savings account may be more appropriate. An easy access account (or ISA) may be best if you don’t know when you’ll need the funds, while a fixed rate bond (or ISA) could be an option if you’re confident you won’t need the funds for a certain period of time.
This week's
average rates
| No Notice | 0.51% |
| Notice | 0.82% |
| Cash ISA | 1.19% |
| 1 Year Fixed Rate Bond | 1.30% |
| 2 Year Fixed Rate Bond | 1.50% |
| 3 Year Fixed Rate Bond | 1.73% |
| 4 Year Fixed Rate Bond | 1.99% |
| 5 Year Fixed Rate Bond | 2.08% |
| 22 May 2018 | |
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Savers looking to stock markets for better returns
Sales of stocks & shares ISAs increased by 47% in 2017, after record-low cash ISA interest rates saw a new wave of investors look to the stock market for a decent return. According to Salisbury House Wealth, some 281,000 new stocks & shares ISAs were opened last year, compared with 190,000 in 2016, with the strong performance of equity markets in the UK and globally also helping to push their cause. The FTSE 100 index increased by 7% in 2017 and the S&P 500 index rose by 18%, while in comparison, the average monthly cash ISA interest rate in 2017 was just 0.36%, the lowest it has ever been since the Bank of England began measuring the figure in 2011.
Pointing out that stocks & shares ISAs have outperformed cash ISAs in 12 out of the last 19 years, Tim Holmes, managing director at the advisory firm, said: "Stocks & shares ISAs have become one of the preferred tax-efficient investment vehicles as cash ISA rates remain in the doldrums. Historically, investors have been much better off in the stock market than a cash ISA, particularly as cash savers are currently losing money once inflation has been taken into account."
Meanwhile, separate research has revealed how investor confidence increased in May, with optimism rising in markets both at home and abroad. Yet while sentiment in the UK market rose 16% in March, from a reading of 69 in April to 80 this month, the data shows that it still significantly trails enthusiasm for global stock markets. Indeed, confidence in Asia Pacific (with a May reading of 123), Global Emerging Markets (120) and Japan (107) is surging ahead, while the North American market (95) recorded a notable bounce back of 20% compared with April.
"Lack of confidence in the UK economy is proving a drag on enthusiasm for the UK market", said Hargreaves Lansdown, the company behind the research. "Our survey of private investors highlighted low growth and productivity, debt and political issues as particular concerns: the HL UK Economic Confidence Index fell again from 66 to 62."
For savers thinking of making the switch from cash to stocks and shares, regardless of where you are thinking of investing, it's vital to remember that stock market investing comes with certain risks. While money deposited in cash-based accounts is guaranteed not to fall in value, there are no such assurances when it comes to stocks and shares. Indeed, you could even end up with less than you put in. Seeking advice certainly seems sensible.
The flipside, however, is the potential to earn returns in excess of those available on a traditional savings accounts right now. Crucially, investments are meant to be kept for the long-term, meaning five years is probably the minimum length of time you need to be thinking about committing your money, giving your funds plenty of time to ride out any market volatility.
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