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Help to Buy ISA not really for buying?

  1. 26 September 2018
  2. By Andi Michael

The government’s Help to Buy ISA has been facing some harsh criticism after the revelation that 45,000 users faced delays in their purchases when attempting to release deposit funds from the ISA.

Many first time buyers who had saved in the Help to Buy ISA with the intention of using the government bonus towards their deposit were surprised to find the bonus could not be accessed until after the house purchase had completed.

This meant that many buyers were left scrambling for money to ensure the property purchase went through, with some now paying back parents or friends.

The Help to Buy ISA was introduced by the government in 2015 to help first time buyers get on the ladder, by offering a 25% boost to their savings. You can save up to £200 per month and need to save a minimum of £1600 to get the £400 minimum government bonus.

However, with the intention of the scheme being to help first time buyers save for a home, it seems strange that the ISA does not offer help towards the biggest issue most buyers face – saving for a deposit.

The bonus is paid after the completion of the sale, accessed by a conveyancing solicitor when you apply to close your account. This means the money can be used to buy furniture or pay towards a mortgage, but is no help towards the upfront costs of buying a home.

Of buyers on reallymoving, this year 19% were using Help to Buy ISAs to fund their first home purchase – it’s unclear how many of them may face a nasty surprise come their completion date.
Our tips:
  • Save in multiple accounts
  • Ensure the Help to Buy ISA is the right choice for you (if you can save more per month, you may want to consider the Lifetime ISA instead)
  • Use our moving costs calculator to work out how much you’ll expect to pay in fees for your move
  • Make sure the property you’re making an offer on is within the Help to Buy ISA limit (£250,000 outside London and £450,000 within London)

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