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Clock is ticking on first-time buyer savings scheme

Prospective first-time buyers saving for a deposit are being urged to make use of their Help to Buy ISA allowance before the scheme is pulled at the end of the year.

Anyone saving for a home is entitled to invest in the tax-free savings scheme which offers first-time buyers the opportunity to deposit up to £200 a month and receive a Government bonus of 25% up to a maximum of £3,000.

But new research by specialist bank, Aldermore, revealed many people were not aware the scheme was closing to new investments on 30 November.

And it was concerned this oversight could mean many first-time buyers may miss the opportunity to benefit from the savings scheme and the Government’s contribution.

Confusion rife

It found confusion was ‘rife’ amongst prospective first-time buyers, 63% of whom were unaware of the cut-off date.

Although first-time buyers only have six months to open a new Help to Buy ISA those already investing in the accounts can continue to make contributions until November 2029. The cut-off date to claim the bonus is 1 December 2030.

Even amongst those who had heard of the Help to Buy ISA, many didn’t know how it worked.

Ewan Edwards, head of savings, Aldermore said: “Buying that first property can seem like a pipedream for many people and the Help to Buy ISA is an innovative product launched by the Government to get them one step closer.

“It’s worrying that a large proportion of prospective first-time buyers are still unsure of what it is, how it works or the fact that the clock is ticking to open one. They could literally be missing out on thousands of pounds worth of Government funding towards their first home.”

Enthusiasm high

But while there is much confusion over the ISA there is also plenty of appetite for it, according to Aldermore’s study.

Well over three quarters of respondents thought a bespoke savings product which helped them save towards their first home was a good idea.

Over 60% of prospective first-time buyers who didn’t have a Help to Buy: ISA said they would be more likely to invest in one if they understood it better. And, once they had been given an explanation, 78% said they would use the product to save for their home.


As well as the Help to Buy: ISA, first-time buyers can also use the Lifetime ISA (LISA) to save for the first property. Like the Help to Buy version, the LISA benefits from a 25% Government bonus.

While savers can invest up to £4,000 each year, they must open the account before they turn 40 and only continue to receive the bonus until they are 50.

The LISA is being recommended as an alternative to the Help to Buy: ISA but only a few providers currently offer the product.

Laura Suter, a personal finance analyst at investment platform AJ Bell, said there were only three LISA offerings compared to 27 in the Help to Buy market. This lack of competition, she explained, was hitting savers’ pockets as the top Help to Buy rate was currently 3% compared to the top LISA rate of 1.1%.

She added: “With the Help to Buy ISA’s days numbered we would hope that providers are working behind the scenes to launch a Lifetime ISA later this year, which in turn will boost take-up among first-time buyers and lead to a healthier market.

“In the first year of its launch, 166,000 people opened a Lifetime ISA saving a total of £517m, but there’s no doubt that more providers would build more awareness, and would mean more people are aware that they can use the ISA to get up to £1,000 a year towards their first home.”

Article by Kate Saines for www.whatmortgage.co.uk

#lifetimeISA #helptobuyISA #firsttimebuyer

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