First-time buyers under 35 who are saving a cash deposit for a house might want to haul over to Abbey’s website [1], pronto.
The bank has a new product called the Abbey 5% ‘Home Saver’ Account that at a glance looks ideal for any saver who qualifies.
It certainly beats the UK government’s approach to helping people into the housing market, which amounts to supporting homeowners [2] who over-stretched themselves (although happily to no great affect so far).
Here are the key details:
- Variable interest rate of 5.00% gross/AER on your savings.
- Make an initial deposit of between £100 and £5,000 and then save between £100 and £300 per month by standing order to get the preferential rate. You will receive a lower rate of 0.10% gross/AER when you pay in under £100 or over £300 in any calendar month, but for that month only. The maximum balance on the account is £50,000. If you miss a payment you will receive an interest rate of 0.10% gross/AER for that month only.
- You have to have a mortgage interview up to 90 days before you come to close the account but as far as I can see there’s no statement saying you have to take an Abbey mortgage.
- You can access your funds at any time but will need to close your account. To close your account you will need to bring in two forms of ID plus the validation checklist that you were given on account opening.
The 5% rate is a very good savings rate these days, although only a couple of years ago you could get much higher rates on these sorts of things. But the key thing is there’s no time limit – it doesn’t revert automatically to some crummy rate after 12 months.
The one-month low interest penalty for missing a payment is okay, too. Some other regular savings accounts would force you out.
That said, the rate is variable, so should definitely keep an eye on the rate and move your money if it gets uncompetitive. I’m not one of those who say you should shuffle £100 around for 50p interest a year, but interest on £5,000 or more is significant.
The downsides? Well, you have to be able to tough it through a mortgage interview with Abbey without the bank making you feel guilty or otherwise sweet talking you into a mortgage. Don’t sign anything, and remember the magic words – “I want to go home and think about it” – then check what they’ve offered against other deals elsewhere, and take the one that is best.
A bigger snag is eligibility – Abbey isn’t interested in older first-time buyers, it wants keen young blood it can try to sell financial products to for years.
To qualify, you must be:
- Under the age of 35
- A first time buyer
- Able to save an amount between £100 and £300 each month
I’m no financial advisor [3] so do your own research, but it looks a good way to save cash if you’re looking to build a deposit and have used up your ISA allowance [4] (which goes up £3,000 to £10,200 [5] next year, of which £5,200 can be in cash).
At the time of writing the probably time-limited account details are here [6].