Help to Buy ISA

It’s increasingly difficult for first time buyers to get on the property ladder so the government is introducing a new savings account to help anyone purchasing their first home

A Help to Buy ISA is available to purchase from 1 December 2015 and if utilised fully could net you and your partner £6000 for free

For every £200 you put into the ISA the government will give you £50 towards your first home purchase

 

How does the Help to Buy ISA work?

The Help to Buy ISA was announced in the 2015 budget in an attempt to tackle the difficulty faced by prospective new buyers who struggle to save for a deposit

The average price of a house in the UK is now just over £200,000 meaning that many will need a deposit of £20,000 for a 90% mortgage

At present housing construction is falling behind demand by almost half yet the government aims to build a million homes in England by 2020 to combat the shortfall

 

Help to Buy ISA rules

  • The maximum you can put in each month is £200

  • The scheme is open for four years starting 1 December 2015

  • Once open you can save into it until the limit is reached with no deadline

  • For every £200 you put into your housing ISA the government will give you £50

  • This adds up to £600 a year

  • You can also open the account with a lump sum of £1000 which will earn you a bonus of £250

  • The maximum you can save in the ISA is £12,000

  • In doing so you can earn £3000 for free

  • You and your partner can open separate accounts and accrue a bonus £6000 towards a deposit

  • You don’t have to save the full amount but there is a minimum of £400 which the government will pay out (meaning you can save a minimum of £1600 to get the minimum bonus)

  • Once you want to purchase a home, you’ll have to let a solicitor sort payment as you won’t ever have access to the £3000 bonus directly

 

Need to know

  • You will need a letter from you ISA provider proving that the account is closed before you claim your bonus

  • Even if you’re planning on buying a home within the next six months it could be worth opening an account to get a bonus of a few hundred pounds

  • If you decide you want to use the money for something else, you can take it out at any time. You’ll just lose your bonus

  • It’s possible to switch providers but you can only have one Help to Buy ISA so shop around for the best rates

 

Providers and their rates

WhoRateExtras
Halifax4%None announced yet
Nationwide2%Allows you to contribute to another ISA too within the limit of £15,240
Bank of Scotland2%None announced yet
Lloyds2%None announced yet
NatWest2%They have promised that new customer introductory rates won't quickly disappear
Aldermore2%Can open separate cash ISA
Newcastle building society1.51%Can open separate cash ISA
HSBC2%None announced yet
Yorkshire Bank0.7%None announced yet
Clydesdale0.7%None announced yet
Barclays2.25%None announced yet. Launches Dec 17th
Virgin Money3%None announced yet
Santander1.5-2%Higher rate available for existing 123 or Select Customers


 

The inside track

  • A £6000 bonus for you and you partner is a fantastic boost for your savings, giving you a total of £30,000 towards your first deposit

  • So far 13 banks and building socities have said they will be providing the ISA but as it is a brand new product more offers are likely to become available.

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