If you are one of the thousands releasing equity from your home, make the proceeds work for you – don’t leave it languishing.
According to recent research from Prudential, nearly 4 million homeowners over 55, plan to downsize, expecting to raise on average around £112,000, although one in ten expect to make more than £200,000.
In addition, the equity release market is booming – as more and more older people look to unlock some of the value in their homes. Lending is expected to break the £3bn barrier if it continues at its current rate.
As the average house price of new customers taking out equity release plans has steadily increased over the last three years, the typical plan size has also increased to just over £95,000, according to the Equity Release Council’s latest Market Report.
So, having made the decision to unlock some of your housing wealth, it’s important to look after the cash that is released – don’t leave it languishing with your high street bank.
You may not need to have access to all the money, so could earns hundreds, if not thousands of pounds in extra interest by shopping around for the best rates.
Whilst we all know it’s not the best option, many people simply leave these funds languishing in their current account or do what they believe is the right thing and switch it into a savings account with their bank.
The problem is, the high street banks are paying pitiful savings rates, so if the money is not moved you could find that you’ve released funds from a valuable asset, only to see it not working in your best interest – excuse the pun!
Looking at an amount of £200,000 in cash deposits, just how more interest could you earn?
Well, if you were to leave it in a high street bank savings account paying 0.01%, your £200,000 would earn just £20 gross in a year.
If you were to split the money, leaving some on easy access, but also tying some up to be available at a later date – you could earn considerably more.
Our example below shows that if you were to split the funds into three non high street bank savings accounts, not only would the funds all be protected under the Financial Services Compensation Scheme (or European equivalent) but you could also earn £3,174 MORE gross interest in just 12 months. Think what you could do with that extra cash!
| Account | Type | Amount | AER % | Gross Interest Per Annum | Maturity Dates/Access |
|---|---|---|---|---|---|
| Easy Access | £65,000 | 1.20% | £780.00 | Easy Access | |
| Notice Accounts | £65,000 | 1.56% | £1,014.00 | 120 days notice | |
|
Bank of London and the Middle East (BLME) 1 Year Premier Deposit Account |
Fixed Term Bonds | £70,000 | 2.00% | £1,400.00 | 12 months |
| Total Savings | £200,000 | £1.60% | £3,194.00 |
Cash exposed to risk outside of FSCS protection = £0
Notes regarding the above accounts
- Easy access. The rate includes a 0.60% bonus for the first 12 months. Not available to anyone who has held the account in the last 6 months.
- Withdrawals are subject to 120 days' notice only; no earlier access is allowed.
- No access within the term. Profit must be paid to a nominated account, it cannot be added to the account. The rate is not guaranteed, in order to comply with Sharia Law the rates listed are an expected profit rate.
If you would like to see how you could improve the interest you are earning on your savings give us a call on 0808 164 6466.
@savingschampion
Find us on Facebook