Saving versus investing for short 4 year time span

[KoblinsGiss]

We have a short term - 4 years (ish) goal to hopefully upsize further and move into a specific area and this is tied to both DC school admissions cycles. We are currently working towards this by 1) significantly overpaying mortgage with house equity in mind at that point in time and 2) investing a comparable amount with a topping up of a deposit on the upsize in mind.

however, because the time scale is short (ie 4 years rather than 10, or more) - what would you wise MNers advice be on whether investing is where our regular savings for a deposit top up should be going really. Market volatility might suddenly bring a war or pandemic at the 3.5 year mark (hope not!) and jeopardise things. The investments are on the more adventurous side by the way.

instead - perhaps we are better placed with the best big standard savings account we can get like the highest garden variety cash ISA or savings account we can find? Fixed rate bonds won’t really do as we are regularly putting in a chunk each month rather than locking a lump sum away.

I think - given the short time scale for the target - a garden variety savings account with a 1.5% that we’ve found might be a safer bet than a moderate risk S&S ISA?

any advice greatly appreciated :)

LISA

With Notice accounts might get up to 2% for a one year lock in.
Some instant access accounts are offering 1.5%
Investing in a multi-asset fund might give you a 5% return on average but it can have big drops, so with a short timescale you risk the amount being lower than you put in.

Cash loses to inflation.

So nothing is really all that good. Doing a mixture of things may be away to do it.

A LISA is for first time buyers - which we aren’t! The plan is to upsize - a home move from current (owned home) to another home. So LISA no good alas

A 90 day With Notice account may be suitable, as you know when you want to access the money. Just checked rates and 1.55% is not much better than some instant access accounts. Maybe keep an eye on them though as maybe as the base rate increases the providers will increase the savings rates.

You can get 1.5% instant access at Chase.

2% at various places if you fix for a year. I wouldn't fix for longer than a year as interest rates are only going up.

Thanks all. Yes everyday savings are currently with chase at 1.5 for day to day kids/holidays type stuff. The actual “this is towards topping up the deposit for big move” savings is currently being invested but I have concerns about what if scenarios where a new pandemic arrives (or something similar) just months before we need the lump sum …

Could you still make the move even without going all in with your savings?

You could do a combination of mortgage overpayment (what's the rate? Remember if you overpay the mortgage, it's effectively saving at the mortgage rate, but obviously you might have limits if you're in a fix) plus a fixed rate savings product, some of these are over 2% now, and possibly some in a low risk investment ISA. If the market isn't favourable when you come to move, you leave the investment and put the money into the mortgage later.

I'd personally go for one year fixed term savings accounts. I'd feel stocks are too risky for such a short length of time

Thanks all. Without getting into number specifics currently - this is what we are doing -

Say the full amount we are able to afford to put away/overpay monthly is X -

1. 50% of X is currently going into the mortgage overpayment - mortgage is fixed for 4 years at 2.6. This amount is set to increase next April when DD nursery 30 hours kicks in, and further increase again when nursery ends, 2 years before our 4 year time range.
2. 30% of X is currently going into a moderate risk S&S ISA. This is what is earmarked as deposit top up which May/May not be needed based on how much current house sells at, but we are saving assuming it will be needed. this amount is also due to go up as above in line with nursery ending.
3. Finally 20% of X is currently going into an easy access 1.5% AER savings account. This is to cover life/rainy days/holidays/kids activities etc but is also steadily growing. This isn’t intended for house move or anything else it’s just a pot on the side.

we could divert the 30% of X currently going into S&S ISA earmarked as deposit directly into the overpayments - but slightly unwilling to not have that available to us at all. Then again as some of you say here S&S is always a risk and perhaps we could just chuck that 30% into a standard savers acccount.

I am a great fan of investing - however, don’t do this if you will need the money in 4 years. Financial cycles are longer term than this. You’ll feel v clever if in 4 years your investments have profited but v daft if they haven’t. Get the new house sorted first, then invest money if you have any left. Priorities - first clear short-term debts, then get the house+mortgage that you want, then put away 2-3m salary for rainy day/ emergency fund, then put away enough for next year’s holiday, THEN invest in stock-exchange/funds/forex/whatever…