An IF-ISA can get you onto the housing ladder 7 years faster than a Cash ISA

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The latest
research by leading peer to peer lending platform Sourced
Capital, part of the Sourced.co
Group, has looked at how best to invest when it comes to saving for a house in
order to save years’ worth of painstaking saving.

Cash ISAs
have become a popular way for many to stash away the cash with the aim of
climbing the ladder, with the Help to Buy ISA in particular helping many save
that all important deposit.  

While buyers
can no longer take advantage of the scheme there are a whole host of Cash ISA
saving accounts that average a return of 2.12% a year with a maximum annual
investment of £20,000 allowed.  

This means
that investing £20,000 a year on the current average UK house price of
£235,298, and when taking into account the addition of compound interest,
maximising the benefits of a Cash ISA would see you pay off the cost of a
property in 10 years compared to the 11.8 years it would require to save
£20,000 a year with no benefit from interest.  

With the
lower cost of buying in Northern Ireland and Scotland, it would take 6 and 7
years respectively, instead of 7 and 7.7 years saving £20,000 a year straight
up, and in the North East a Cash ISA can also cut your saving time to 6 years
instead of 6.5. 

In London,
you’re looking at a longer saving stretch of 19 years although this is
marginally better than saving for 23.8 years without the help of an ISA.

However,
investing in an Innovative Finance ISA (IFISA) through a peer to peer platform
such as Sourced
Capital could help you pay off your property much faster, with annual
returns hitting 10% and higher.

With backing
from the UK government, showing their confidence in the sector, there is now
encouragement to invest in property through peer to peer lending. The IFISA is
a category of ISA which was launched in April 2016 for UK taxpayers.
Previously, there have been two main types of ISA: Cash ISAs and Stocks and
Shares ISAs. Similar to these ISAs, the IFISA allows you to invest money
without paying personal income tax. This enables you to invest your money into
the growing peer to peer market. 

Like cash
ISAs Each tax year, you get an allowance of up to £20,000 to put into IFISAs
which you can distribute across your different ISAs should you wish to. In
addition, you can transfer your previous year’s ISA investments into your
IFISA.

While this
investment option allows for a much quicker return across the board, nearly 3
years faster in the UK as a whole, the time saving is most notable in
London where an IFISA investment could accrue a big enough saving pot to buy in
the capital at a cost of £475,458 in just 12 year’s, as opposed to 19 year’s
via the average Cash ISA – a seven year difference! 

Stephen
Moss, founder and MD of Sourced
Capital, commented: 

“Record low
interest rates over such a prolonged period have been great for those looking
to secure a mortgage, however, those still trying to accumulate a savings pot
have suffered where the rate of interest is concerned.

As a result, the consumer has become savvy when it comes to saving and the market has been flooded with a whole host of options to make our money work harder. While some Cash ISAs are proving popular, the peer to peer sector has really led the way with some of the best rates of return and whether you are trying to save a mortgage deposit, or pay off your property completely, there are a number of platforms like Sourced who can help you reach your goal far quicker than some of the more mainstream options.   As always, the biggest hurdle is educating the consumer on the additional options open to them and although their capital may be at risk, investing via more professional platforms in the peer to peer sector can bring a much better return.”

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