I’m a saving towards my first home: Where should I keep my deposit?

I am a prospective first time buyer with a £50,000 deposit currently accruing.

I have £15,000 in a Lifetime Isa with the 25 per cent government bonus included.

About £20,000 has been gifted to me by my mum and dad, who are currently in my bank’s savings account paying 2.25 per cent, and I have a further £15,000 which I have saved myself and which has been put into my bank’s money. bank sits Isa deal pays 3 per cent.

The money is all good to go and can be withdrawn without penalty.

Unfortunately, I’m not quite at the stage where I can afford the area I want to buy, but I think I should be after another year of disciplined saving.

What should I do with my deposit money in the meantime? Would moving it hinder a potential mortgage application? And if not, where is the best place to keep it while I’m looking for something to buy?

Ed Magnus of This is Money replies: It sounds like you’re in a great position and that you’ve been perfectly sensible about where you’ve kept the money.

Well done for using a Lifetime Isa. This is a great option for most people who are saving for a down payment on their first home.

Savers under 40 can open a Lifetime Isa (Lisa) and until they turn 50, and the government will put in £1 for every £4 they save, giving them a £1,000 bonus on the maximum £4,000 they save each year can save in it.

The main downside is that the value of the property cannot exceed £450,000, but I’m sure you are aware of that.

Assuming your Lisa is in cash rather than investments, if you have a year before you can buy, it may be worth checking to make sure you have the best rate on the market.

Moneybox is currently the current market leader, paying 3.5 percent on its Lisa cash deal.

It says it accepts digital transfers from most providers, so this could be worth investigating.

> Read our guide to Lifetime Isas

As for the Isa cash deal, you have a very competitive rate. The most accessible cash Isa rate on the market currently pays 3.45 percent, so transferring your cash Isa to a market-leading deal will only add 0.45 percentage points in interest.

On £15,000 in savings, which equates to £69 in additional interest over a year. If you’re willing to lock up the money for a year, you could get up to 4.25 per cent, which could mean an extra £194 in interest the following year.

– Check out the best cash Isa rates here.

In terms of the gift from your mom and dad that you currently have in easily accessible 2.25 percent savings, you could do a lot better.

The average low-threshold rate is currently 2.02 percent, according to Moneyfacts, so you’re doing better than the average.

However, the best deal pays 3.71 percent. The savings and investment app, Chip, has direct access without restrictions, which is supported by the FSCS.

– Check out the best easily accessible savings rates here.

While rates may change, if you leave £20,000 in your bank’s easily accessible deal and pay 2.25 per cent, you’ll be on track to earn £454 over the next year.

Moving it to Chip’s deal and paying 3.71 per cent puts you on track to earn £754 over the next year.

If you are sure that it will take you another year, you can also choose to put the money into an annual contract with a fixed interest rate.

The best one-year fixed rate currently pays 4.81 percent. – but be warned – you won’t be able to access your money until the 12 months are up.

– Check out the best fixed rate savings accounts here.

However, please note that if you are a higher rate taxpayer, your tax-free savings deduction will only allow you to earn up to £500 tax-free.

To avoid being taxed on anything above that amount, it may make sense to add some of your savings to your Lisa or cash Isa.

If you still have a year to save, maxing out your Lisa contribution is a good idea given the 25 percent government markup.

To give our reader the best possible answer, we have spoken Brian Byrneshead of personal finance at Moneybox.

What should they do with their deposit?

Brian Byrnes replies: First of all, congratulations on building such a large deposit. You have saved a considerable amount yourself, which is quite an achievement given the cost of living.

When it comes to your deposit, it’s really important to keep it easily accessible.

You don’t want to lock up these funds looking for a higher rate while you are actively looking for a property and you certainly don’t have the time horizon to invest these funds.

The good news is that unlike the past decade, you can now get some return on your money while keeping it readily available.

Moving your money around in search of a better rate won’t necessarily affect your ability to get a mortgage, although moving it excessively may raise questions with your lender.

You will most likely be asked to show your bank statements to your lender, and if the deposited money is new to your account, you will likely be asked to document where the money came from, increasing your records.

Considering the interest rates you currently receive on the funds are at the high end of the market, it may be worth keeping them where they are if your purchase is imminent.

One thing to consider with your deposit is whether you can take advantage of another year of Lifetime Isa bonus if you postpone your purchase.

You may be able to top up another £1,000 for free from the government by depositing £4,000 into your Cash LISA this tax year.

Crucially, these funds are still available for your home purchase when needed.