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New savings account pays £500 bonus…but there’s a catch

Rebecca Goodman
Written By:
Rebecca Goodman

A new savings account paying 4% interest has been launched with a £500 bonus paid, if you take out a mortgage with the provider.

It is a regular savings account with a maximum monthly deposit of £500.

The Home Deposit Saver from Leeds Building Society is designed to help those buying a new home.

Once they receive a mortgage offer from the society, anyone with an account will then receive a £500 bonus into their savings account.

Those who open an account can put away up to £500 every monthbut there are no penalties if they don’t do this every month. There is a maximum limit of £30,000 and as it’s a variable account, the interest rate can change. 

It’s also possible to make one withdrawal a year from the account without facing a penalty.

Along with receiving a mortgage offer, to be eligible for the £500 savers must also have at least £2,500 in their account and have been saving for at least six months. 

How does the account compare to others?

The £500 bonus for those who take out a mortgage with Leeds Building Society is a nice benefit, especially as it’s for first-time buyers and second steppers. It’s designed to help those buying a new house and with inflation soaring and many people struggling with rising prices, it’s likely to come in handy.

However, it should not be the only reason for opening the new savings account. The savings market has been very competitive in recent months, following successive rate rises by the Bank of England, so it’s important to see how it compares to others.

When it comes to regular savings accounts, for example, First Direct is in the top spot as its pays 7% interest on a maximum deposit of £300 per month. The Club Monthly Saver from Lloyds also pays a higher rate of interest, of 6.25%, on up to £400 per month.

You need to have had the account open for six months to receive the bonus, yet you could also open a one-year fixed-rate account as another option. The market-leading one-year account at the moment pays 4.48% from SmartSave.

Yet these accounts don’t pay an extra bonus so you need to factor in the £500 with the society’s account. You would also need to compare the type and cost of mortgage offered to make sure you’re getting one that’s right for you and one that provides value for money.

Matt Bartle, director of products at Leeds Building Society, said: “We know building up a deposit is the biggest obstacle facing most first time buyers so wanted to find a way we could reward and motivate them to keep saving.

“Paying the £500 bonus to savers once they’ve received their mortgage offer gives an extra boost to top up their funds ready for purchasing their new home.

“And while we had first time buyers in mind when we designed this product, we’re pleased to be able also to offer it to second steppers and other buyers as they move on to their next home.”