The Help to Buy ISA Scheme was introduced in 2015, to assist first time buyers save up for a deposit and get on to the property ladder – which was proving difficult for many in the lead up to the introduction of the scheme.
Why is a Help to Buy ISA right for you?
In order to benefit from the scheme a first time buyer would need to open a specialist Help to Buy ISA. The scheme worked by allowing first time buyers to pay a maximum £200 into their ISA per month. The government would then effectively top up each person’s savings by 25% (up to a maximum bonus of £3,000) when they completed on their first home. However, first time buyers were only eligible to receive the bonus on properties with a value up to £250,000 or £450,000 in London. The scheme saw a massive uptake- with over one million accounts being opened.
How did the Help to Buy ISA scheme change in 2019?
In 2019 the Help to Buy ISA scheme was closed to new applicants. Anyone who had opened a Help to Buy ISA prior to that date can still benefit from the scheme. In 2019, when the scheme ended, the Land Registry published that the average house price in the UK was £230,292. Since then, the housing market has been in a constant state of flux due to high mortgage rates and the cost of living rising dramatically making it even more difficult for first time buyers to get on to that elusive property ladder.
That figure has now been updated and in July 2024, the Land Registry published that the average house price in the UK is now £289,723. This equates to an increase in the average house price of almost £60,000 in five years.
What does this mean for first time buyers now?
Some first-time buyers may not be aware of the value limit imposed in the scheme; with the latest new statistics from Land Registry confirming that the average house price in the UK is now a lot higher than the £250,000 limit, it may be the case that a large number of people who have opened Help to Buy ISA’s may not even be eligible to receive a bonus, due to the rise in house prices.
This is evidenced by statistics HM Treasury which shows that in 2019 over 114,355 people received the government bonus which dramatically decreased in 2023 to only 55,974 people.
What are the things to note as a first time buyer?
It is due to this issue that the Building Societies Association (BSA) and The Investing and the Savings Alliance are urging the Chancellor to update the rules that are clearly outdated to reflect the current position of first-time buyers in a housing market, where getting on the property ladder has never been more difficult, with one of the biggest barriers being the deposit.
While there are alternative ISAs out there that can compensate for the issues with the Help to Buy ISA, such as a lifetime ISA for example, it is important for first time buyers to be aware what type of ISA’s they have and be sure it works for them, as many first time buyers might be relying on the government bonus which, as explained above, they may well not be eligible for.
