Help to Buy ISA - Rates Rundown

23rd March 2016

If you are not looking to fully use your cash ISA allowance, but are saving to buy your first home, a Help to Buy ISA could be the answer. The good news is that there has been some competition between providers recently. 

When the Help to Buy ISA scheme was launched, just 13 providers took the plunge, with Halifax taking all of the early plaudits with its market leading rate of 4.00% tax free/AER, putting its competitors in the shade. The level of providers offering a Help to Buy ISA so far has been disappointing, although in the last month there have been more new providers, mainly building societies, that have entered the market and we may well see more at the start of the new tax year.

In the UK there is a huge emphasis on owning property, so Help to Buy ISAs are bound to be popular with anyone that has aspirations of home ownership. Although early signs left us underwhelmed about the rates on offer, 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. 

While the Help to Buy ISA won’t help first time buyers to find the cash to save, the 25% bonus is a real incentive to help them put away as much as they can afford. It might be only £5 or £10 a month at the beginning, but knowing that every £1 will be boosted by 25p makes it far more compelling to tighten your belt and do what you can.

So, the situation on the 1st December 2015, when the Help to Buy ISA scheme was launched was one of limited participation from providers in offering the new type of ISA, with only a small number of savings providers taking part. The most popular interest rate seemed to be 2.00%, with various providers offering what quickly became the benchmark. However, there were exceptions, most notably the market leader Halifax (4.00% tax free/AER) and setting themselves apart from the pack, Virgin Money (3.00% tax free/AER).

The majority of the early movers in this area were well-known brands, with the majority of the big high street names offering accounts. One exception was Barclays Bank, who announced that it will offer a Help to Buy ISA, but delayed its release until the new year. Launched on the 1st January 2016, a month after its rivals, the offering from Barclays paid 2.25% tax free/2.27% AER, going straight into our Help to Buy Best Buy Table in third place after Halifax (4.00%) and Virgin Money (3.00%).

Following the initial flurry of activity after the launch of the Help to Buy ISA scheme in December 2015, there was little news from providers. However, February brought with it a couple of changes as Clydesdale Bank and Yorkshire Bank increased the rate on their Help to Buy ISA to bring it more in line with the competition and there was a new entrant to the market in the form of Chorley Building Society.

Yorkshire Bank and Clydesdale Bank increased the rate on its Help to Buy ISA, for both new and existing account holders, from 0.70% on £1+, 0.90% on £15,000+ and 1.00% on £30,000+ to a flat rate of 2.00% tax free/AER.

Chorley Building Society launched a new Help to Buy ISA, paying 2.00% tax free/AER. Although the rate was not market leading, it was interesting to see a new player in the Help to Buy ISA market, especially as the provider was one of the few building societies to launch an account at this point.

The most recent changes to the Help to Buy ISA market have occurred in the last few weeks, as we approach the end of the 2015/16 tax year.

Santander made an interesting move by raising the interest rate of its Help to Buy: ISA to 4.00% tax free/AER for both new and existing account holders. This was the first provider to challenge Halifax’s dominance at the top of the Best Buy Table and better rates and more competition is a more than welcome sight. It will be interesting to see whether this will spur other providers into life and also whether Halifax responds to this challenge.

We have also seen three building societies launch Help to Buy ISAs. Progressive Building Society launched a new Help to Buy ISA with an interest rate of 2.75% tax free/AER. Cumberland Building Society joined Halifax and Santander at the very top of the market with an account paying 4.00% tax free/AER. Finally, this week Monmouthshire Building Society released an account paying 2.10% tax free/AER. However, the main point to note for all three of these accounts is that they are only available to local or existing customers of these building societies, so will not be as widely available as the majority of options on the market.

Following the Budget on 16th March, the new Lifetime ISA that will be introduced in April 2017, could see Help to Buy ISAs eventually replaced. It has been announced that Help to Buy ISAs could potentially be transferred to a Lifetime ISA or continue to be used and those saving for a deposit now as well as retirement may still want to consider a Help to Buy ISA because of this. For more information on Lifetime ISAs, download our FREE Factsheet.

If you would like more information on Help to Buy ISAs, take a look at our FREE Help to Buy ISA Factsheet, which will give you more information on whether one of these accounts could be suitable. The key thing to remember is that you can only deposit a maximum of £200 per month (plus an initial amount of £1,000), therefore if you open one of these, you will not be able to fully use your ISA allowance, unless you also consider a Stocks and Shares ISA.

For the best interest rates on the market, please refer to our Help to Buy ISA Best Buy Table or call us on 0800 321 3581 to talk to one of our expert savings advisers, we'd love to hear from you.


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