Help to Buy ISAs launch in the UK for first-time buyers


Help to Buy ISAs launch in the UK for first-time buyers

If you’re planning to buy your first property in the near future, it’s likely you’ll have been paying close attention to the Government-backed Help to Buy ISAs that are launching today (1 December). The ISAs mean it’s easier to save up for a deposit on a home, as savings will be boosted by the Government so more people could get onto the property ladder*.

First announced in the Spring Budget, details for the saving scheme have remained few and far between until recently. The first providers of Help to Buy ISAs have now announced their rates, so let’s take a look at how they could help you to save.

How it works

With the Help to Buy ISAs, the Government will boost your savings by 25%. The maximum you can save each month is £200, so the Government will top this up to £250. However, during the first month that the Help to Buy ISAs are launched, you’ll be able to save an extra £1,000 – meaning a total investment of £1,200.

The maximum the Government will give you is £3,000, which you’d get by saving £12,000 in a Help to Buy ISA. However, you can save more in a Help to Buy ISA if you want because it offers a good interest rate – you just won’t get the extra 25% boost from the Government. You’ll have to save a minimum of £1,600 into the account, which would get you £400 from the Government – any less than this and you won’t be eligible for the bonus.

Help to Buy ISAs are just like regular ISAs, so the interest you make on any savings won’t be taxed. This also means that if you open one, you won’t be able to open another cash ISA in the same financial year. The Government cash will never be paid directly to you – you’ll only be able to claim it when you apply for a mortgage and it will be transferred directly to your mortgage lender.

If you’re saving up to buy a property with a partner, the good news is that you’ll both be able to open separate Help to Buy ISAs. This means that the total amount you could net from the Government is £6,000 over a period of just over four and a half years – a substantial sum towards a housing deposit.

Help to Buy ISA providers

Halifax was one of the first providers to announce the details of its Help to Buy ISA, offering an interest rate of 4%. Nationwide, HSBC, Bank of Scotland and Natwest both offer Help to Buy ISAs at an interest rate of 2%, with a few smaller providers offering lower rates. There are still a few providers yet to announce their interest rates and details – they’re likely to come out over the next week or so.

It’s worth keeping in mind that just because you open a Help to Buy ISA with a bank or building society, it doesn’t mean that you’ll have to take out a mortgage with them. You’ll still be able to shop around high street lenders to find the best mortgage rates or you might want to consider using a mortgage broker, like Ocean. Mortgage brokers have access to broker-exclusive offers, so this could be a way to get the best deals.


*It was reported in August 2016 that the government bonus on Help to Buy ISAs cannot be included in the initial deposit on a home, but is paid once the sale has completed. Find out more here.