45,000 1st-time buyer sales delayed by Help to Buy ISA

A quarter of first-time buyers are baffled by the Help to Buy ISA, saying the Government’s assistance scheme is misleading or unhelpful.

Research by finance company OneFamily showed that 45,000 property sales have been delayed because the Help to Buy ISA cannot be used to help a first-time buyer pay for a deposit – and the buyer has only realised that when it’s too late.

One in six (15 percent) of first-time buyers have had to borrow money from family or friends to fill the gap in their deposit that the ISA was supposed to cover.

Now OneFamily wants the Government to promote the Lifetime ISA because it’s already the long-term replacement for the Help to Buy ISA and, unlike the latter, the Lifetime ISA can be used to pay deposits.

The Help to Buy ISA was introduced in 2015, and since then 1.2 million savers have opened an account in the government-backed saving scheme that aims to help first-time buyers save tax-free for their first home. However, only 196,000 have used the ISA to buy a place to live.

This is partly because the savings will only be released once a property sale has been completed. And one in six savers told OneFamily they could not then use the money they had saved for a deposit. As a result, a quarter (23 percent) of first-time buyer purchases fell through or were delayed.

The problem is likely to grow unless first-time buyers are given more explicit information about how the ISA works. The OneFamily research revealed that almost one in seven (69 percent) intend to buy a home in the next three years using the Help to Buy ISA for a deposit. That could affect an extraordinary 700,000 buyers.

Nici Audhlam-Gardiner, managing director of Lifetime ISAs at OneFamily, said: “If you are hoping to buy your first property, then you need to avoid the Help to Buy ISA if you are planning to use the bonus towards your initial deposit.

“The average deposit for a first-time buyer is now more than £30,000 so it’s harder than ever to save up for a home, and for many people it is by far the biggest hurdle.

“The Lifetime ISA, introduced last year, is far better for first-time buyers as not only do savers make more in government bonuses, they can actually use it towards the deposit.

“We support the closure of the Help to Buy ISA next year. We are urging the government to reiterate its closure plans and further support the Lifetime ISA and help the thousands of people who are desperate to get on the ladder.”

Help to Buy ISA facts and figures

1.2 million accounts opened since 2015, 196,000 bonuses paid

Total value of HTB ISA bonuses paid so far is £132 million

Maximum bonus available over lifetime of HTB ISA is £3,000

Lifetime ISA pays maximum bonus of £1000 pa for up to 32 years

Total value of Lifetime ISA bonuses paid so far is £130 million