From today, prospective first-time home buyers can open a Help to Buy Isa, with interest rates of up to 4% available. We take a look at the details of the scheme and round up the best deals on offer so far.
The Help to Buy Isa is a government scheme designed to help would-be first-time buyers get onto the property ladder.
If you’re saving for your first home, you can deposit up to £200 a month in a Help to Buy Isa (plus an additional initial deposit of £1,000), with the government topping up these savings by 25%, up to a maximum bonus of £3,000.
You can use Help to Buy Isa savings to buy a home worth up to £250,000, or £450,000 in London. If you’re buying with someone else, you can open separate accounts and jointly earn a bonus of up to £6,000.
- If you’d like to talk to an expert about Help to Buy Isas, you can contact the Which? Money Helpline
- For impartial advice about the different types of mortgages available to first-time buyers, call Which? Mortgage Advisers on 0808 252 7987
Best Help to Buy Isa deals so far
Many of the leading banks and building societies have signed up to offer a Help to Buy Isa. There’s a good range of options for savers, with different interest rates, upselling deals and cashback offers on the table. We’ll be updating this list with the best deals as they’re announced.
Halifax Help to Buy Isa – 4% interest rate – best interest rate announced so far
With the highest interest rate announced so far, Halifax says savers depositing the maximum amount over five years can turn £13,000 of contributions into over £17,500 when buying a house (including the government bonus).
Virgin Money – 3% interest rate
Barclays Help to Buy Isa – 2.25% interest rate: launches 17 December. Customers can only open an account in branch or by telephone.
Aldermore Help to Buy Isa – 2% interest rate: customers who already have an Aldermore cash Isa can pay in to a Help to Buy Isa too.
HSBC Help to Buy Isa – 2% interest rate
Nationwide Help to Buy Isa – 2% interest rate: customers can pay into another Nationwide cash Isa in the same tax year. Cashback of up to £1,750 on offer for customers who take out a mortgage with Nationwide.
Natwest Help to Buy Isa – 2% interest rate
Santander Help to Buy Isa – 2% or 1.5% interest rate: Santander 123 World and Select customers will receive an interest rate of 2% while all other customers will get 1.5%.
Ulster Bank Help to Buy Isa – 2% interest rate
Lloyds Bank Help to Buy Isa – 2% interest rate
Bank of Scotland Help to Buy Isa – 2% interest rate
Newcastle Building Society Help to Buy Isa – 1.51% interest rate: (0.51% in any month you make a withdrawal or don’t pay anything in). You can also open a separate cash Isa alongside the Help to Buy Isa.
Clydesdale Bank Help to Buy Isa – 0.7% interest rate
Yorkshire Bank Help to Buy Isa – 0.7% interest rate
Principality Building Society, Royal Bank of Scotland and First Direct won’t be launching products this month, but are considering doing so in the future.
How do I get a Help to Buy Isa?
First-time home buyers aged 16 or over can open a Help to Buy Isa. You will need to sign two declarations, one when you open the account and another when you apply for the bonus, to confirm that you are a first-time buyer.
You can open the account with an initial deposit of up to £1,200 in the first month. This includes a £1,000 one-off contribution, and the usual monthly maximum payment of £200.
If you don’t want to contribute the maximum amount each month, that’s fine. The minimum bonus payment from the government is £400, so you will need to save at least £1,600 in your Isa before you can earn this.
The bonus is paid when you purchase a property, and the Help to Buy Isa can be used alongside other schemes such as Help to Buy equity loans and shared ownership.
A word of warning, though: if you’ve already paid in to a cash Isa within the 2015/16 tax year (which started on 6 April 2015), there’s a good chance you won’t be able to open a Help to Buy Isa until April 2016, as you can only pay in to one cash Isa each tax year. So far, only Nationwide and Aldermore are letting existing Isa customers also contribute to a Help to Buy Isa in the same tax year.
Find out more: delve into the details with our full Help to Buy Isa guide.
Is a Help to Buy Isa right for me?
It depends on your circumstances. If you’re looking to buy a property quickly, a Help to Buy Isa might not be the best choice for you because it takes such a long time to qualify for the maximum bonus allowance: on top of the maximum initial deposit of £1,000, you can only save up to £2,400 a year in your Help to Buy Isa, so it would take a minimum of four-and-a-half years to save £12,000 and benefit from the maximum government bonus of £3,000.
That said, if you’re in the initial stages of saving for a mortgage deposit then it’s well worth opening a Help to Buy Isa – especially given the high interest rate on offer from Halifax.
And even if you’re quite far along in the home-buying process, you’d only need to save into a Help to Buy Isa for three months to qualify for £400 of free money, assuming you contributed the maximum amount allowed over the period.
Find out more: are you ready to be a first-time buyer? Ask yourself these key questions before jumping in.
How to get your Help to Buy Isa bonus: step-by-step
Here are the steps you’ll need to take in order to get your government bonus:
- Open a Help to Buy Isa and save money towards your deposit.
- When you’re ready to buy your first home, close the account.
- You will then receive a closing letter from your Isa manager. Give this to your solicitor.
- Your solicitor will use the letter to apply for your government bonus.
- The bonus will be transferred to your solicitor, who can then complete the house purchase.
- Check out our guide on the new London Help to Buy scheme
- Get the lowdown on how to save for a mortgage deposit
- Watch our video guide on how to get a mortgage
Your home may be repossessed if you do not keep up payments on your mortgage.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.