Fair amount to save but likely to need access - what would you do?

[Pippaandpolly]

We have inherited about £15k and would, in about a year, like to buy a house. We've got about £10k already saved (currently in ISAs) and will continue to add to it over the course of the year. What would you do with it in the meantime?

I think we're better off out of bonds as from what I can see most of them tie you in completely for a year/two years/etc and if we want to buy in 10 months or 14 months (or whatever) then that would mean we couldn't necessarily access it when we needed. So that leaves regular saving accounts? We'll top up ISAs next April when we can put more in them and I've found a regular savings account that'll give us 8% (but can only put £250 in a month so will need drip feeding). We have absolutely no clue about things like the stock market.

Interest rates are so rubbish on most accounts at the moment, we're tempted to put it in Premium Bonds. Is that totally ridiculous?

Stock Market is only really recommended if you are looking to invest for 5+ years, so I wouldn't suggest you even consider that as an option. With the regular saver, what happens to the interest if you need it within the year? Most that I've seen would mean you get no interest if you don't keep money in for full 12 months. You really have 2 options:

1. High interest savings. Look around for best rates, bear in mind most places offer their highest rates on Internet only accounts so you couldn't access the money in a branch, however most of these have no penalties for withdrawing.
2. Put money into a 1 year bond, check first what you would lose if you need to withdraw during that time. A lot of them still pay you some interest, eg you lose 60 days interest for early closure, however that may still be higher than the rate you could get on instant access.

Hm ok, had written off bonds but that sounds better than I thought; will look into them more. Thanks for your help

Just be aware that it's not always the case that you can withdraw from a bond but just lose some interest. Some providers will categorically not allow early closure.

Thanks Marrow, will bear that in mind.