Help to Buy ISA – how have they done?

Recent government statistics have revealed that the Help to Buy ISA scheme is helping first-time buyers to get on the property ladder three years earlier than they otherwise would. The result has been calculated by looking at the average age of first-time buyers both with and without the ISAs. On average, those who use the ISA to buy their first home are three years younger than those who do not, with the median age of those using the Help to Buy ISA being 27.

Launched in December 2015, the scheme offers a maximum bonus of £3,000 from the government to those buying a home. It allows first time buyers to boost up to £12,000 of their savings by 25% when they buy a property for £250,000 or less, raised to a limit of £450,000 for those buying in London. The scheme remains open to new savers until the end of November 2019, with contributions able to be made until the end of November 2029. The government bonus has to be claimed by 1st December 2030.

So far, more than 1.1 million Help to Buy ISAs have been opened, with over 350,000 completing a purchase using the scheme. This amounts to 106,612 property completions and 143,894 bonuses paid by the government. The average bonus is currently £725, with the mean value of homes purchased through the scheme being £171,648. This is somewhat lower than the average house price for first-time buyers, which comes in at £190,679.

However, the Help to Buy ISA will for the most part be replaced by the Lifetime ISA (LISA), which offers a similar bonus but can also be used to save for retirement, as well as purchasing a home. LISAs are only available to people aged 40 and under; those with Help to Buy ISAs are able to transfer their savings into a LISA which will enable them to save more each year.

Additionally, those transferring from a Help to Buy ISA to a LISA during the current tax year will potentially benefit from a greater government bonus. The value of a Help to Buy ISA, as it stood on 5th April 2017 plus interest earned, can be made as a single transfer and won’t count towards your LISA allowance for 2017/18, but will qualify for the government bonus, giving savers able to take advantage of this situation an added boost.