Help to Buy ISAs: The Final Countdown

As of November 30th, first-time buyers will no longer be able to open a Help to Buy ISA and benefit from the 25% government grant. What does this mean for those still trying to get onto the property market and what is replacing the scheme? Residential consultant, Chris Unwin, explains…

Launched in December 2015, the Help to Buy ISAs scheme was met with excitement by those longing to get onto the property ladder, but thwarted by ever-increasing house prices, low-interest on savings and unachievable deposit requirements.

By August 2017, more than one million of these ISAs had been opened, resulting in over £1.8 billion in savings (Gov UK). They offered better interest rates than most standard high street savings accounts, plus the bonus of the government adding 25% to your savings up to £12,000, to help with the costs of buying a new home.

Four years on, these are set to be replaced by the Lifetime ISA (Lisa). Originally launched in 2017, these allow customers to save more – up to £4,000 a year compared to £2,400 with the Help to Buy ISA – with a possible £1,000 a year government bonus, for up to 32 years. The savings in these ISAs can be withdrawn for a first-time property purchase, or retirement either before the age of 60 or as a result of terminal illness (Money Saving Expert). However, if you need to make a withdrawal for any other purpose, you will incur an exit fee. 

At the moment, there is only a handful of Lifetime ISAs on the market, compared to over 25 Help to Buy ISAs, and the banks aren’t rushing to offer them. Unfortunately for customers, this means there’s not much competition for interest rates, but hopefully this will change when the Help to Buy ISA is withdrawn. 

If an ISA is not for you, fear not! Government ISAs aren't the only schemes available for home movers. There are several “help to buy” mortgage options available, aimed at both first time buyers and home-movers. A broker will be able to help you go through the most suitable options for your situation.

If you’re reading this before November 30th 2019, there’s still time to open a Help to Buy ISA and, as long as you purchase your first home by the end of November 2029, you will still be entitled to the government bonus - but be quick! When this scheme is gone, it is unlikely to be coming back in this form.

26th November 2019