Savings versus property: Are houses still the safest bet?

Mutual insurer, Royal London, has found the ‘best-buy’ interest rates on savings are now higher than annual average property price growth in England.

Using the latest Land Registry figures to carry out its investigation, Royal London noted the average home in England grew in value by 2.6% in the past 12 months to £247,430.

The best fixed-rate savings bond, meanwhile, as identified by analysts at Moneyfacts, was 2.75% for a seven year deal. Meaning the best savings rate has performed better than the average UK property.

Even the best easy access savings account, which currently pays 1.42%, would be enough to beat house price rises in the slowest regions of London and the South East, some areas of which have seen price declines.

Becky O’Connor, personal finance specialist for Royal London, said there had been a turning point when it came to the value of saving money compared to investing it in property.

“Savings rates have been offputtingly low over recent years, as a result of the rock bottom Bank of England base rate. However, they have risen slightly as the base rate has increased,” she said.

“Coupled with a decline in the rate of house price growth, this trend has resulted in the most competitive savings accounts now paying more interest annually than property owners typically earned in the last 12 months.”

Taking advantage of slow house price growth

While this might look like bad news for homeowners, for anyone keen to get onto the property ladder and putting together a deposit the rising attractiveness of savings will be good news.

What’s more, the slowdown in the market has created opportunities for first-time buyers to get onto the property ladder.

There are also many experts who believe Brexit and the uncertainty surrounding it has been a major contributor to the current slowdown and we must wait until after the UK’s departure from the EU to gain a better picture of how prices will fare going forward.

Dilpreet Bhagrath, mortgage expert at online mortgage broker, Trussle, said: “With Brexit negotiations ongoing, causing continued economic uncertainty, many potential sellers will be reluctant to move on and many potential buyers will be waiting it out to see what happens with property prices next.

“For those who are currently in a position to buy a home, building up equity in a home can be more beneficial than throwing away money on rent.”

She added: “It’s always worth considering personal circumstances and future plans alongside movements in the economy.”

Annual house price growth 12 months to November 2018

Source: Land Registry

Best-buy savings rates

Source: Moneyfacts