The beginning of December will see the launch of the new Help to Buy ISA scheme, announced earlier in the year.
The scheme is designed to help first time buyers get on the property ladder, recognising that they often struggle to save for a deposit. This assistance takes the form of a bonus that is paid by the government when purchasing your first home.
As a country that places a huge emphasis on owning property, Help to Buy ISAs are bound to be popular with anyone that has aspirations of home ownership. The hope is that not only do banks and building societies back this new initiative by offering these ISAs, but that the interest rates on offer will be worth shouting about.
As is the case with most standard regular savings accounts, the amount that can be saved is capped at a relatively low level and this, along with the increased coverage in the media, may lead to some highly competitive rates. Those providers that offer mortgages will be keen to actively promote these ISAs, hoping that savers will turn to them when they are ready to purchase, with the mortgage and associated insurances being the jewel in the crown. We may also see some Help to Buy ISAs linked to current accounts, the high street banks’ pseudo savings accounts that continue to offer some of the best rates for savers. TSB and Nationwide still offer up to 5% AER on balances of £2,000 and £2,500 respectively and Santander offers the best rate of 3% AER on larger balances of between £3,000 up to £20,000. This should be good news for the interest rates, as providers compete for the business in the hope of encouraging the long term relationship.
Whilst full information on the individual accounts that will be on offer are not available at this stage, there are a number of details we do know about how Help to Buy ISAs will work, below is a refresher of some of the key points to note.
- The ISAs will be available to all first time buyers above 16 years old.
- Up to £200 per month can be saved in the account, with an initial opening deposit allowed of up to £1,000.
- The government will top up the amount saved by 25%, subject to a minimum bonus of £400 and a maximum of £3,000, so you need a balance of £1,600 to earn the bonus at all.
- The bonus is paid via the solicitor on the purchase of a property with a maximum value of £250,000 (or £450,000 in London).
- Available from 1st December 2015, first time buyers will have four years in which to open a Help to Buy ISA, although once opened, there will be no time limit to either adding to the account or the payment of the bonus.
- It will not be possible to pay into both a cash ISA and a Help to Buy ISA in the same tax year.
- Banks and Building Societies that offer a Help to Buy ISA will set the interest rate and product design of the account itself.
As mentioned earlier, specific details of the ISAs themselves and the interest rates on offer have yet to be released, but we will provide full details as and when they are available, so watch this space.
We plan to let all of our users know the full details, including a comparison table to ensure that you, as always, are fully informed.
If you have any further thoughts or questions, please call us on 0800 321 3581 to talk to one of our expert advisers.