More than 2million Help to Buy Isa savers set to lose Government money
- People could be trapped in Help To Buy Isas with nearly 2.2million open
- Government top up of 25% only payable if users buy property under £250k
- Help to Buy Isas were introduced in 2015 but closed to new accounts in 2019
Nearly 2.2 million people won’t be able to access the Government bonus on their Help To Buy Isas, according to a freedom of information request.
Savers only stand to benefit from the 25 per cent bonus if they purchase a property worth £250,000 or less outside of London, or £450,000 in London.
Due to house price rises since the accounts were created in 2015, more savers will now find themselves disqualified from the bonus.
According to the FOI request by the comparison site Finder, Britons have stashed a collective £5.5billion into these accounts.
The 25 per cent bonus only gets applied on a Help to Buy Isa when a property is purchased, whereas the 25 per cent bonus is paid as you save in a Lisa
Help to Buy Isas were introduced in 2015 to try and help people get on the property ladder. However, they were closed to new customers in November 2019, in favour of the Lifetime Isa.
The key benefit of the Help to Buy Isa came from the fact the Government would provide a 25 per cent top up at the point of purchasing a home.
But the £250,000 property price cap outside the capital, is now far more of a limiting factor for its stranded customers than it was in 2015.
Since then, the average house price has increased by 38 per cent, yet the limit has never increased.
Separate research by Finder found that the average house price in 132 of 348 local authorities is above the limit of £250,000.
The Lifetime Isa or Lisa allows for property purchases up to £450,000 all across the UK, though even that limit is proving too low for some buyers in the most expensive areas.
Savers can pay up to £4,000 a year into a Lisa each year compared to £2,400 a year with a Help to Buy Isa. Plus, they get the 25 per cent Government bonus while they are saving, rather than at the point they buy a property.
It’s not possible to combine a Lisa and Help to Buy Isa. This means that someone wanting to take advantage of the Lisa’s superior benefits would need to transfer their money across.
Even so, they won’t be allowed to move it all across at once as it is only possible to transfer up to £4,000 per year and comes at the expense of adding fresh money into a Lisa.
Sophie Barber, 27, from London, is someone who feels let down by the Help to Buy Isa scheme. Sophie opened a Help to Buy Isa in 2016 to save towards buying her first home.
‘House prices kept rising and I quickly realised the £250,000 limit would make it almost impossible to use the Isa in the area I wanted to buy,’ said Sophie.
‘I decided to open a Lisa as a replacement in 2021 but I’m angry that I have wasted my time completely with the Help to Buy Isa, with no bonus granted for the money I’d already saved in those five years.
‘I’m also now restricted by putting £4,000 a year into the Lisa so I can’t quickly build my savings in this account back up to the deposit contribution I’d already saved in the Help to Buy Isa.’
Finder is campaigning for Britons to be able to move their full Help to Buy Isa balances into a Lisa in one go, keeping the bonus they have accrued.
Matt Mckenna, personal finance expert at Finder, said: ‘This will ensure that around 2 million people with a Help to Buy Isa can keep their much-needed Government bonus and not lose ground in the long slog to save for their first property.
‘It is hard to escape the feeling that the public are the ones being punished for the failings of the Help To Buy Isa being kept up to date, with billions of pounds left in limbo.
‘The Lifetime Isa effectively superseded it and offers more opportunity to save each year, so why can’t people simply transfer their savings – and the bonus they were promised – into it?’
