1st December 2015
Banks and building societies have been launching their Help to Buy Isa accounts, under a new scheme whereby the Government will top up the savings of home buyers by 25%. So far 12 providers have launched products. Here the experts give their verdicts on the best deals.
So far, Halifax is the clear winner with a rate of 4%, but here is a table of all the products on offer, compiled by Moneyfacts.co.uk, the comparison website:
Charlotte Nelson, finance expert at Moneyfacts.co.uk, says: “Buying a house is one of the UK’s greatest aspirations, so the Help to Buy ISA is certainly going to appeal to those who are dreaming of owning their own home.
“Some providers also seem to be keen to attract these savers by offering headline-making rates, particularly if they also have mortgage products to offer. For example, Halifax is offering a market-leading 4.00% yearly on their Help to Buy ISA deal, which looks highly enticing when compared with the average easy access ISA, which pays at just 1.09% yearly today.
“This is the first time since January 2009 that Moneyfacts.co.uk has seen an easy access ISA pay a rate as high as 4.00%. Clearly, by presenting themselves as the top choice for first-time buyers, Halifax hope to one day turn their ISA savers into mortgage borrowers.
“However, savers should remember that opting for a Help to Buy ISA with a provider does not mean that they have to take out a mortgage with them. When the time comes, they would be wise to look at the whole mortgage market first to ensure they get the best deal.
“Another factor to bear in mind is that increasing house prices could mean that minimum deposit requirements may soon exceed the maximum that can be saved in these accounts. However, savers will still be benefiting from some of the best ISA rates around as well as a significant boost from the Government.
“Finally, it’s also important to point out that all of these ISA rates are variable, which means that they won’t stay at this competitive level forever. Anyone considering these deals should therefore act fast to benefit from the current offers.”
Anna Bowes, director of Savingschampion.co.uk says: “Although it’s still early days and many providers are yet to announce what they will offer, it will be extremely disappointing if all Isa providers don’t get on board. We need the competition to drive rates in the right direction, so it is disappointing that only 12 providers so far are offering Help to Buy ISAs.
“The scheme is designed to help first time buyers to get on the housing ladder, due to the ever growing deposit size needed to realise that dream. It’s the providers that force the need for larger deposits to achieve an affordable rate on their mortgage, so the least they can do is support savers trying to build a reasonable deposit.
“Given that the accounts are more akin to regular savings accounts, we had hoped for rates closer to some of the very high rates currently available on standard regular saving accounts, to reflect the small amounts being saved. So early indications have left us underwhelmed. Halifax could well clean up with its market leading 4% rate – double what the majority are currently offering. Having said this, the interest rate is really the icing on the cake. A generous 25% bonus is a great incentive for those who are struggling to find the money to save for a deposit.”
How the Help to Buy Isa works:
If you are saving to buy your first home, save money into a Help to Buy: ISA and the government will boost your savings by 25%.
So, for every £200 you save, receive a government bonus of £50. The maximum government bonus you can receive is £3,000.
You can put away up to £200 a month into your Isa and to kickstart your account, in your first month, you can deposit a lump sum of up to £1,200.
The accounts are available to each first time buyer, not each household. This means that if you are planning to buy with your partner, for example, you could receive a government bonus of up to £6,000 towards your first home.
The minimum government bonus is £400, meaning that you need to have saved at least £1,600 before you can claim your bonus. The maximum government bonus you can receive is £3,000 – to receive that, you need to have saved £12,000.
When you are in the process of buying your first home, your solicitor or conveyancer will apply for your government bonus.
You should check whether your solicitor or conveyancer is participating in the scheme, as they will need to register before they can apply for your bonus.