Derin Clark

Derin Clark

Online Reporter
Published: 26/11/2019

Although there are just days left to open a Help to Buy ISA, those saving for a deposit for their first home are being urged to open one now, as even after the scheme ends they can still deposit money into the account and benefit from the 25% Government bonus.

Help to Buy ISAs end this Saturday, 30 November, but once opened, savers can continue paying into the account until 30 November 2029 and can claim the 25% bonus up until 1 December 2030.

How does a Help to Buy ISA work?

Help to Buy ISAs are specifically for those saving towards a deposit for their first home. To open the account, an initial deposit of up to £1,200 is allowed and then monthly deposits of up to £200 are permitted. It offers a maximum bonus of £3,000 and, to gain this, savers would need to save £12,000 into the account. For savers unable to save the maximum £12,000, a 25% bonus will still be added to any amount over a minimum of £1,600. The bonus is only added to the full amount saved in the account and is not added until mortgage completion, with the bonus payment being arranged on behalf of the saver by their solicitor. Savers can withdraw money from a Help to Buy ISA without using the money to purchase a house, however they will lose the bonus if they do this.

The best Help to Buy ISA rates

Penrith Building Society currently tops the Help to Buy ISA chart offering a rate of 3.00% on a minimum opening deposit of £1, however this account is only available to those living in Cumbria. The top rate on an account without any opening restrictions is from Barclays Bank offering 2.55%, which requires a £1 deposit to open. Buckinghamshire Building Society also offers a Help to Buy ISA without any opening restriction and pays 2.50% on a minimum opening deposit of £1.

Alternatives to Help to Buy ISAs

Savers who miss out on opening a Help to Buy ISA can still get a 25% Government bonus by opening a Lifetime ISA (LISA) instead. While LISAs still offer a 25% bonus to those using the money saved to purchase their first home, there are significant differences between Help to Buy ISAs and LISAs. The main difference is that a LISA can only be opened by those aged 18-39. In addition to this, the money saved can only be used to purchase a first home or for retirement. Savers can deposit up to £4,000 into the account each year and the 25% bonus is added yearly, which means that savers could receive a maximum bonus of £32,000.

While the bonus on a LISA is more generous than that offered on a Help to Buy ISA, LISA rates are currently much lower, with the top rate in the LISA chart paying 1.40%. This rate is being offered by Moneybox, which pays the interest monthly and requires a minimum opening deposit of £1.  Nottingham Building Society offers the next-best rate of 1.25% yearly on an opening minimum deposit of £10.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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