Investing in housing better than cash
The report suggests that parents who save for their children in cash Junior ISAs may be missing out on the chance to help their children buy their first home as financial advisors predict continuing increase in house prices.
Nearly three in five IFAs expect UK house prices (the Halifax House Price Index) to rise in the next three years while over two thirds expect prices to rise over the next five years and more than four in five expect prices to climb over 10 years.
Sean Oldfield, chief executive officer at Castle Trust, said: “Cash Junior ISAs are a good way to get in the habit of saving for your children but average rates of return can be lower than investing long term in the UK housing market.
“If you want to help your children save for the deposit on their first home, the only way to ensure you keep pace with house prices is to invest in house prices.”
Rates on cash Junior ISAs from 31 banks and building societies – where parents can save up to £3,600 a year for under-18s – range from as little as 1.4% to 6%.
Castle Trust, which offers Income and Growth HouSAs that qualify for inclusion in Junior ISAs, believes that parents should look at investments such as housing, particularly if they are saving to help their children buy a home in the future.
Castle Trust’s two investment products, Income and Growth HouSAs, provide returns linked to, and in excess of, the Halifax House Price Index and can be taken out for terms of three, five or ten years.
The Income HouSA tracks any rise or fall in the Halifax House Price Index and also pays an annual income of between 2% and 3%, depending on the term of the investment.
The Castle Trust Growth HouSA offers a gain of between 1.25 times and 1.7 times any increase on the Halifax House Price Index, or a loss of between 0.75 times and 0.3 times any decline.
Oldfield added: “HouSAs allow many more people than ever before to invest in the UK housing market in a way that is accessible and easy to understand.
“They appeal to those looking to help their children save for their first home through a Junior ISA or experienced investors wanting to diversify their investment portfolio.”