With a new financial year beginning today, thousands more first-time buyers will be able to open a Help to Buy Isa.
Help to Buy Isas offer prospective first-time buyers a government bonus of up to £3,000 when buying their first home, depending on how much they’ve saved.
The Help to Buy Isa launched in December last year, but Isa contribution rules meant that those who had already paid into cash Isas that year had to wait until the new financial year to open one. It is likely that banks will be inundated with new Help to Buy Isa account applications now the 2016/17 year has begun.
- If you’re saving to buy your first home and want to understand more about mortgages, call the impartial experts at Which? Mortgage Advisers for a free chat: 0808 252 7987
Best Help to Buy Isa deals
If you’re keen to open a Help to Buy Isa, the accounts with the highest interest rates are listed below. Click the links to find out more about each Isa with Which? Money Compare.
- Santander Help to Buy Isa – 4%
- Halifax Help to Buy Isa – 4%
- Cumberland Building Society Help to Buy Isa* – 4%
*Cumberland only offers the product in branch, so you’ll need to based in or around Lancashire, Cumbria or southern Scotland to open an account.
Help to Buy Isas are also available from Virgin Money (3% interest), Barclays (2.27%), Aldermore, Bank of Scotland, Chorley Building Society, Clydesdale Bank, HSBC, Lloyds Bank, Nationwide and Yorkshire Bank (all 2%), and Newcastle Building Society (1.51%).
It’s worth shopping around before signing up for a Help to Buy Isa, as several banks offer split Isas (where you can also pay into another cash Isa with the same bank) and deals on mortgages.
Find out more: Which? Money Compare – compare all available Help to Buy Isas using the Which? Money Compare tables
What is a Help to Buy Isa?
The Help to Buy Isa is a government scheme designed to help would-be first-time buyers get onto the property ladder.
You can deposit up to £200 a month in a Help to Buy Isa (plus an additional initial deposit of £1,000). The government will top up these savings by 25%, up to a maximum bonus of £3,000, when you buy a house or flat.
There are rules around who qualifies and what type of property you can buy. To find out more, check out our guide to Help to Buy Isas.
Lifetime Isa launching in 2017
In the 2016 Budget, Chancellor George Osborne announced a new savings scheme called the lifetime Isa. Launching in 2017, it’s designed to help people buy their first home or save for retirement.
Like the Help to Buy Isa, the lifetime Isa offers a 25% bonus on savings when you buy a house, but it allows you to save more – up to £4,000 each year. The maximum bonus is also much higher.
You need to be aged between 18 and 39 to open a lifetime Isa, and you’ll be eligible to earn an annual bonus until you reach the age of 50. This means that you could theoretically get a bonus of £32,000 using a lifetime Isa, although you would need to contribute the maximum amount for 32 years in order to receive this.
If it all sounds too good to be true, bear in mind that withdrawing the money for any purpose other than to buy a house or retire will incur hefty penalties – so it may not be the best savings option for those who want a bit of flexibility.
Find out more: lifetime Isa – get the lowdown in our full guide
I want to open a lifetime Isa next year. Is it still worth opening a Help to Buy Isa now?
During the 2017/18 tax year, anyone with a Help to Buy Isa will be able to transfer savings into a lifetime Isa and still save an additional £4,000.
For that reason, it’s worth opening a Help to Buy Isa for now, even if you think the lifetime Isa will be a better option in the long run.