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23 Nov 2019

One week until Help to Buy Isas close to new first-time buyers - should you get one?

The accounts pay a free 25% bonus towards your first home

In just seven days the Help to Buy Isa, a government-backed savings initiative for first-time buyers, will close to new savers for good.

Help to Buy Isas will no longer be available to new applicants after 30 November, meaning there's just one week left to open one of these accounts that pays a generous 25% government bonus to help people get on the property ladder.

The lifetime Isa is an alternative way to save, as it also pays the 25% bonus, but it comes with some rules that might be off-putting to some people.

If you're looking to sign up during this final week, we reveal the best Help to Buy Isa rates and which accounts are closing before the official deadline.

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What are the best Help to Buy Isa rates?

According to the latest government figures, covering the Help to Buy Isa's introduction in December 2015 to 31 March 2019, the account has enabled 310,658 first-time buyers to earn an average bonus of £920 to put towards their first home.

Couples and friends can pool their bonuses when buying a property together, and a total of 234,074 property completions have been supported by the savings scheme at the last count.

The table below shows the 10 highest rates offered by Help to Buy Isa providers.

Penrith Building Society Help to Buy Isa3%£1 minimum initial deposit. Only available to those with a Cumbria postcode.
Vernon Building Society Help to Buy Isa2.85%£1 minimum initial deposit. Only available to those who live within 25 miles of Stockport.
Darlington Building Society Help to Buy Isa2.8%£1 minimum initial deposit. Only available to those with DL, DH, SR, TS, YO and HG postcodes.
Barclays Help to Buy Isa2.58%£1 minimum initial deposit.
Newcastle Building Society Help to Buy Isa2.56%£1 minimum initial deposit.
Nationwide Help to Buy Isa2.5%£1 minimum initial deposit.
Virgin Money Help to Buy Isa2.5%£1 minimum initial deposit.

Source: Which? Money Compare. Correct on 21 November 2019, but rates are subject to change.

The three highest-paying accounts are only available to those who live near the respective building societies.

For accounts that are available nationwide, Barclays offers the top rate of 2.58% AER.

While this exceeds the current rate of inflation, which measured 1.5% in October, it is still 0.42% short of the rate from Penrith Building Society at the top of the table.

Can you sign up if you've just turned 16?

Help to Buy Isas are open to any first-time buyers from the age of 16 upwards.

However, the documents required to prove your identity may be harder for a 16-year-old to provide.

You must provide a UK driving licence or passport, proof of address - which usually covers utility bills, bank or credit card statements, tenancy agreements or HMRC tax notifications.

Now, 16-year-olds aren't old enough to have a UK driving licence, and aren't likely to have any of the proof of address documentation other than perhaps a bank statement.

National Insurance numbers should be sent out up to three months of someone turning 16 - but if their parents weren't signed up for child benefit this won't happen automatically, and they'll have to call HMRC to request their NI number.

There have been reports of some 16-year-olds experiencing delays when waiting to receive their NI number. HMRC says while there had been a delay earlier this year, it has been resolved since 5 September and that 'National Insurance letters are being processed as normal'.

Anyone with a problem of this nature is advised to call HMRC on 0300 200 3500.

Help to Buy Isas closing early

While many providers will accept applications on 30 November, we'd advise against leaving it to the last minute - especially as some providers are closing their accounts early.

Tipton & Coseley Building Society withdrew its Help to Buy Isa at the end of September - this had previously offered the second-best rate.

Santander has also announced it will be closing its Help to Buy Isa account on 28 November. A Santander spokesperson told us this is being done 'to ensure that we are able to effectively meet the needs of our customers'.

As 30 November is a Saturday, you should check to see whether the provider you might want to open an account with is open at the weekend.

What happens if you already have a Help to Buy Isa?

You don't need to do anything if you already have a Help to Buy Isa. You'll be able to continue saving, and will be eligible for the government bonus, until 1 December 2030.

The only people who need to take action are those who haven't yet opened a Help to Buy Isa, but want an account.

Help to Buy Isa or lifetime Isa?

Once the Help to Buy Isa closes to new savers, the main alternative will be the lifetime Isa, which is for those saving for their first home or retirement.

Lifetime Isas have some similarities to the Help to Buy Isa, in that they also help first-time buyers get onto the property ladder and the government pays a 25% bonus to top up what's saved.

But there are some key differences you should be aware of:

Help to Buy IsaLifetime Isa
Who can open it?Anyone aged 16 or over who has never owned a property.Anyone aged 18 to 39, but if you want to put your savings 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 afterwards.Up to £4,000 a year.
Can you deposit a lump sum?No, you can pay in a maximum of £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 further deposits after you turn 51.
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; up to £450,000 in London.Up to £450,000 anywhere in the UK.

For more information on how lifetime Isas work, and which providers offer this kind of account, see our full guide on lifetime Isas.

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.