Derin Clark

Derin Clark

Online Reporter
Published: 15/10/2019

With less than seven weeks left for first-time buyers to open a Help to Buy ISA, savers need to act now to avoid missing out on the 25% bonus.

After the 30 November 2019, savers will no longer be able to open a new Help to Buy ISA, although they can continue adding funds to an existing Help to Buy ISA until 30 November 2029, but will have to claim the 25% bonus before the 1 December 2030.

What is a Help to Buy ISA?

A Help to Buy ISA is a tax-free savings account that was created for first-time buyers to help them get onto the property ladder. The ISA allows a maximum opening deposit of £1,200, after which savers can deposit £200 each month up to a maximum of £12,000. When savers use the money to buy their first property, they will receive a Government bonus of 25%. To receive the bonus, savers must have saved a minimum of £1,600 into their Help to Buy ISA and use all the money saved to purchase their first home. The maximum Government bonus that can be received is £3,000 for which savers must have saved £12,000.

The Government bonus can only be applied for by a solicitor or conveyancer and must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used towards the house deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.

There are currently a number of competitive rates available in the Help to Buy ISA chart. Barclays Bank currently offers the highest rate, excluding those that are only available to people living within specific postcodes, in the Help to Buy ISA chart with its Help to Buy: ISA paying 2.58% AER. A full range of Help to Buy ISAs available can be found on our Help to Buy ISA charts.

What are the alternatives to a Help to Buy ISA?

Savers looking for an alternative to a Help to Buy ISA could consider a Lifetime ISA (LISA), which also offers a 25% Government bonus. LISAs can only be opened by those aged 18-39 and allows a maximum of £4,000 to be deposited each year. A 25% Government bonus is added to savings within a LISA on a monthly basis. Once LISA savers turn 50, they can no longer deposit money into their account or earn the 25% bonus. The money in a LISA can only be withdrawn to buy a first home, when the saver turns 60 or if they are terminally ill with less than 12 months to live. If a saver withdraws money for any other reason, they will pay a 25% charge.

At the moment LISAs are offering much lower rates than Help to Buy ISAs and there is a lot less competition on the market, however this could change once Help to Buy ISAs are no longer available. In the past week, Nottingham Building Society increased the rate on its Lifetime ISA and Lifetime ISA Online, which now pay 1.25% AER. Moneybox continues to top the LISA chart with its Moneybox Cash Lifetime ISA paying 1.40% AER. A full range of LISAs currently available can be found on our LISA chart.  

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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