Skip to main content

Home buying boost from ISAs

Almost 200,000 Help to Buy individual savings accounts (ISAs) bonuses have been used to buy homes since the scheme was launched three years ago – with a total value of £157 million and an average pay out of £800, according to a recent report from the Treasury Help to Buy: ISA scheme Quarterly Statistics.

The Help to Buy ISA allows first time buyers to save £1,000 into the scheme in the first month, and then £200 every subsequent month. When the property is purchased, the government will add a 25% bonus to all contributions. The scheme will pay a bonus of up to £3,000 – on the first £12,000 saved. Any property worth up to £250,000 (£450,000 in London) can be bought under the scheme.

The report also reveals that: in March alone £10 million was paid in bonuses – a sum that’s only ever been matched in two previous months; 146,753 properties have been bought with the help of at least one Help to Buy ISA bonus; 196,007 people have received bonuses through the scheme and that the average value of a property bought through the scheme is £172,448 – compared to the average first time buyer price of £188,429, and a national average house price of £224,144.The average age of a first-time buyer using the scheme is 27, compared to a national average first time buyer who is 30.

Sarah Coles, Personal Finance Analyst at Hargreaves Lansdown said: “The Help to Buy ISA has been a lifeline for almost 200,000 people, who have used a bonus to help them buy a property in the past three years. They’ve had £157 million of free money from the government, to help them with the incredible challenge of being able to afford their first property.

“Incentives like these can make an enormous difference for house buyers, particularly first-time buyers, who have a mountain to climb to get a deposit together. If you are keen to own a home of your own, it’s vital to take advantage of any incentives you can in order to get a head start up that mountain.

Another tax free (on exit) option Coles highlights is the Lifetime ISA which allows first time buyers to invest up to £4,000 a year, saved or invested at any time. The 25% bonus is paid monthly. The scheme is open to everyone aged 18-39, and the LISA must be held for at least 12 months before the purchase is made. It can be used to buy any property worth up to £450,000.

“For first time buyers aged 18-39, who don’t plan to buy within the next 12 months, it’s also important to consider the Lifetime ISA. First time buying couples can rack up £2,000 a year in tax-free Lifetime ISA bonuses. It’s a great way to give their deposit a healthy boost,” says Coles.

What Investment magazine: SAVE 47%

Growth Company Investor: free trial