The government released an update this week on how the Help to Buy ISA has supported first-time buyers in the UK.
The Help to Buy ISA was first introduced in December 2015 as a way to help people who were saving for their first home, and since its launch 531,507 property completions have been supported by the scheme.
Help to Buy proved popular as anyone could receive a 25% bonus from the government if they used the Help to Buy ISA to buy their first property. The only snag is that they can only buy a property of £250,000 or less, with a slightly higher limit of £450,000 in London. It’s also worth noting that the maximum government bonus that can be received is £3,000.
However, those stipulations didn’t deter first-time buyers from benefiting from the scheme and to date 695,150 bonuses have been paid with an average bonus value of £1,185. This means the total bonuses paid so far has reached £824 million.
The latest statistics also reveal that the highest number of property completions within the scheme was in the North West, Yorkshire and the Humber and the lowest number came from Northern Ireland and Wales. The report also stated that the median age of a first-time buyer using the scheme was 28-years old, which is slightly lower than the national first-time buyer median age of 30-years old.
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This information comes after the scheme was closed to new accounts in November 2019, but those who already have a Help to Buy ISA can still benefit from the scheme until November 30, 2029 as long as the bonus is claimed by December 1, 2030.
Although Help to Buy is nearing the end, there is still an option for first-time buyers to gain support from the government with their first property purchase.
The lifetime ISA was introduced in April 2017 and it offers a more flexible way to save for not only a first home, but also retirement.
Similarly to other ISAs, a lifetime ISA is a savings account where you can save your money tax-free within the £20,000 allowance. But, there is also an attractive bonus from the government as it adds 25% to the first £4,000 that is saved each year. This means you could get up to £1,000 extra added to your savings pot every year.
If this sounds too good to be true, it’s not - but there are a few conditions that you must follow to get the bonus.
The lifetime ISA is only open to people who are aged between 18 and 40 (but you can add savings until you turn 50), so if you hit this demographic it’s worth investigating.
The government bonus is also only available if you use the money to buy your first home or if you withdraw it after you turn 60. If you decide to withdraw the money for another purpose, the government takes back 25% of your savings and this could mean you lose more money than you’ve gained.
You can also only pay into one lifetime ISA a year, but you could open another type of ISA to use up your £20,000 allowance. We delve deeper into this in our ISA guide.
So, could a lifetime ISA work for you?
The answer to that question is complex and entirely depends on your circumstances. But, if you can follow the rules highlighted above and you are saving for your first house, it could be a viable option.
The good news is there is an opportunity for up to £32,000 in bonus cash from the government, so that fact alone should entice you to carefully consider this type of savings account.
To find out more about lifetime ISAs and the accounts available, visit our lifetime ISA page.
As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.