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Time is running out for first-time buyers to sign up to the government’s free cash scheme

Help to Buy Isas have helped more than 196,000 people get on the property ladder

Today marks three months until the government’s Help to Buy Isa, a savings product for first-time buyers, closes to new savers.

Help to Buy Isas will close to new applicants from 30 November 2019, putting an end to the hefty 25% government bonus on offer to wannabe home-buyers through this type of account.

However, lifetime Isas – which also reward first-time buyers with a 25% bonus, but work quite differently – will continue to be available. And savers with existing Help to Buy Isas will still qualify for the bonus as long as they buy before December 2030.

Here, Which? reveals the top-rate Help to Buy Isas, how the accounts work and the key differences between Help to Buy Isas and lifetime Isas.


What are the best Help to Buy Isa rates?

The Help to Buy Isa, which was launched in 2013, has so far paid out 196,007 bonuses to support the purchase of 146,753 property completions.

The government claims that first-time buyers using Help to Buy Isas are able to buy a property at an average age of 27, whereas those who don’t use the scheme have to wait until they hit 30 to get on the property ladder.

In addition to the government bonus, Help to Buy Isa accounts also pay interest on your savings. The table below shows the 10 Help to Buy Isas with the highest rates. The links will take you through to Which? Money Compare.

Account  AER Terms
Penrith Building Society Help to Buy Isa 3% £1 minimum initial deposit. Must have a Cumbria postcode to apply.
Tipton & Coseley Building Society Help to Buy Isa 2.95% £10 minimum initial deposit. Must live in a B, DY, WS or WV postcode area to qualify for this interest rate, unless you are an existing savings customer with an account opened before 23 May 2016.
Vernon Building Society Help to Buy Isa 2.85% £1 minimum initial deposit. Must live within 25 miles of Stockport to apply.
Darlington Help to Buy Isa 2.8% £1 minimum initial deposit. Must live in a DL, DH, SR, TS, YO or HG postcode area to apply.
Barclays Help to Buy Isa 2.58% £1 minimum initial deposit.
Newcastle Building Society Help to Buy Isa 2.56% £1 minimum initial deposit.
Nationwide Help to Buy Isa 2.5% £1 minimum initial deposit.
Virgin Money Help to Buy Isa 2.5% £1 minimum initial deposit.
Buckinghamshire Building Society Help to Buy Isa 2.5% £1 minimum initial deposit.
Ulster Bank Help to Buy Isa 2.5% £1 minimum initial deposit.

Source: Which? Money Compare. Rates correct as of 29 August 2019, but are subject to change.

  • Local building societies may have better rates

As the table shows, the accounts with the four top rates all have regional restrictions and are only available to those who live locally.

When it comes to accounts that are available nationwide, Barclays comes out on top paying 2.58%. While this easily beats the current rate of inflation (which measured 2.1% in July), it is still 0.42% short of Penrith Building Society’s overall top rate.

Beware of the cash Isa rules

All Help to Buy Isas are cash Isas, and therefore anyone who has already paid into a cash Isa in this tax year will not be able to pay into a Help to Buy Isa.

Isa rules state that savers can only pay into one of each type of Isa in each year – i.e. one stocks and shares Isa, one cash Isa, and one innovative finance Isa. A Help to Buy Isa counts as your cash Isa option.

Everyone has an Isa allowance of £20,000, meaning you can pay up to £20,000 into your Isa accounts overall throughout the tax year. You can pay the whole £20,000 into one account, or split the allowance between multiple accounts.

If you already have a Help to Buy Isa

Anyone who has a Help to Buy Isa already doesn’t need to do anything – existing accounts won’t be closing until 1 December 2030, so you still have plenty of time to continue saving.

The only people who need to act now are those who have been considering opening a Help to Buy Isa but haven’t got round to it yet, as after 30 November you’ll have missed your chance.

Help to Buy Isa or lifetime Isa?

The main alternative to a Help to Buy Isa is a lifetime Isa.

This savings account has some similarities to the Help to Buy Isa, in that it also aims to help first-time buyers get onto the housing ladder, and features a 25% government bonus. But there are some key differences you should be aware of:

Help to Buy Isa Lifetime Isa
Who can open it? Anyone aged 16 or over who has never owned a property. Anyone aged 18-39 – but if you want to put the deposit towards a property, rather than accessing it in retirement after the age of 60, you can’t have owned a home before.
What kind of Isa is it? Cash Isas only. Cash Isa or stocks and shares Isa.
How much can I pay in each year? A maximum of £3,400 in the first year; £2,400 each year after. Up to £4,000 a year.
Can you deposit a lump sum? No, you’re capped at paying in £200 a month, except upon opening the Isa when you can deposit an extra £1,000. Yes, but no more than £4,000.
What is the maximum government bonus? £3,000, if you save £12,000. £32,000 if you save the maximum amount of £128,000 over 32 years between the ages of 18 and 50; you cannot make any deposits over the age of 50.
When is the bonus paid? The bonus is paid to your conveyancer/solicitor upon completion. Monthly, into your account.
Does the property have to be a certain value? Up to £250,000 in most areas of the UK; £450,000 in London. £450,000 anywhere in the UK.
When can the account be used to buy a home? Once you’ve saved at least £1,600 to earn the minimum £400 bonus. This can be done in three months if you use the maximum deposits. You must have had the lifetime Isa for at least a year.
How many providers offer this Isa? There are 26 Help to Buy Isa providers – but some local building society accounts may only be available to those who live in certain areas. There are currently 13 lifetime Isa providers offering 14 accounts. Four are cash Isas, eight are stocks and shares investment accounts. One is only for people associated with the Met police, and another is only accessible to financial advisers.
Are there fees? No. There are no fees with cash lifetime Isas, but many stocks and shares accounts do charge fees. What you’ll pay varies between providers.
Can I withdraw the money if I’m not buying a house? You can withdraw the money at any time, but you won’t receive the bonus. Yes, but unless you’ve been diagnosed with a terminal illness or are aged 60 or above, you’ll be charged a 25% withdrawal penalty.
When can I apply? Until 30 November 2019. There is currently no end date.
Can I transfer this Isa? You can transfer to another Help to Buy Isa or lifetime Isa. If transferring to a lifetime Isa, you can only use the bonus from one account to put towards buying a property. Some lifetime Isa providers accept transfers, but not all. If you transfer out to a different type of Isa, you’ll still be charged the 25% withdrawal penalty.
Can I open more than one? No. Yes, but you can only open and pay into one in each tax year.

You can search through hundreds of cash Isas and savings accounts with Which? Money Compare.

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? Money Compare is a trading name of Which? Financial Services Limited.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

Categories: Money, Savings & Isas

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