Derin Clark

Derin Clark

Online Reporter
Published: 05/11/2019

With the average deposit required for a first-time buyer currently £41,099, savers are being urged to open a Help to Buy ISA now or risk missing out on a 25% Government bonus.

According to research carried out by Halifax and YouGov, 64% of consumers surveyed said that saving for a deposit was a big challenge. The research also found that the average first-time buyer deposit of £41,009 accounts for just under a fifth (18%) of the current average house price of £224,709 – a significant rise from the average deposit of £27,059 required for a higher deposit of 20% 10 years ago.

To help first-time buyers get onto the property ladder, savers can get a 25% Government bonus by saving into a Help to Buy ISA, but they need to act quickly to open one as it will no longer be available after the 30 November. The only alternative for savers after November is to turn to the Lifetime ISA to get a 25% Government bonus on their deposit. However, savers should be aware that if they find later on that they are not eligible for the bonus, they will face penalties for withdrawing their cash. As well as this, savers can earn more interest with a Help to Buy ISA, 2.41% on average (based on the top 10 best rates) versus 1.20% on average on a cash Lifetime ISA.

Top Help to Buy ISA

Provider Gross rate at £4,000
Barclays Bank 2.55%
NatWest 2.47%
Ulster Bank 2.47%
Nationwide BS 2.50%
Virgin Money 2.50%
Buckinghamshire BS 2.50%
Monmouthshire BS 2.35%
Nottingham BS 2.25%
Halifax 2.25%
HSBC  2.23%

Lifetime ISAs

Provider Gross rate at £4,000
Moneybox 1.40%
Nottingham BS 1.25%
Newcastle BS 1.10%
Skipton BS 1.00%

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Homeownership may still feel out of reach for many consumers, despite a healthy savings habit, which is why any boost to their deposit would be a welcome addition. Savers can get a max boost of £3,000 with a Help to Buy ISA and up to £1,000 a year with a Lifetime ISA, and recent research suggests they may well need this extra cash more than they may know.

“Indeed, with the average deposit for those buying their first home hitting £41,099, this represents under a fifth of the average house price in the UK of £224,709. In fact, according to the analysis from Halifax and YouGov, a decade ago first-time buyers had a much smaller deposit (£27,059) but this made up 20% of the average house price of £138,413.

“Unlike Help to Buy ISAs, a Lifetime ISA could penalise savers for withdrawing their cash as it only allows access for buying a home, or once they turn 60 or become terminally ill. However, savers who are adamant that they will be using a Lifetime ISA may not find much choice.

“Still, someone without any financial support from their family or a partner to buy a home with may feel like homeownership is unlikely to ever happen and could feel as though they will be renting for life. Hopefully, this will not be the future for everyone who does desire their own home, but to combat this outlook, taking advantage of any Government schemes to help them onto the property ladder is wise.”

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