- People could be trapped in Help To Buy Isas with almost 2.2 million open
- Government top-up of 25% payable only if users buy a property under £250,000
- Help to Buy Isas were introduced in 2015 but closed to new accounts in 2019
Almost 2.2 million people will not be able to access the government bonus on their Help To Buy Isas, according to a Freedom of Information request.
Savers can only benefit from the 25 per cent bonus if they buy a property worth £250,000 or less outside London or £450,000 in London.
Due to the rise in house prices since the accounts were set up in 2015, more savers will now be disqualified from the bonus.
Britons have deposited a collective £5.5bn into these accounts, according to an FOI request from comparison website Finder.
Help to Buy Isas were introduced in 2015 to try and help people get on the property ladder. However, in November 2019 they were closed to new customers in favor of the Lifetime Isa.
The key benefit of the Help to Buy Isa was based on the fact that the Government would provide a 25% top-up at the time of buying a home.
But the £250,000 price cap on properties outside the capital is now much more of a limiting factor for its stranded customers than it was in 2015.
Since then, the average house price has increased by 38 percent, yet the cap has never been raised.
Separate Finder research found that the average house price in 132 out of 348 local authorities is above the £250,000 mark.
A Lifetime Isa or Lisa allows property purchases of up to £450,000 across the UK, although even this limit is proving too low for some buyers in the most expensive areas.
Savers can pay up to £4,000 a year into Lisa each year, compared to £2,400 a year with a Help to Buy Isa. Plus they get a 25% government bonus while they save, rather than when they buy the property.
It is not possible to combine Lisa and Help to Buy Isa. This means that someone who wants to take advantage of Lisa will have to transfer their money.
Even so, they won’t be allowed to move everything at once, as only £4,000 a year can be transferred and this comes at the expense of adding new money to Lisa.
Sophie Barber, 27, from London, is someone who feels let down by the Help to Buy Isa. Sophie opened a Help to Buy Isa in 2016 to save for her first home.
“House prices kept rising and I quickly realized that the £250,000 limit would make it almost impossible to use an Isa in the area I wanted to buy,” said Sophie.
“I’ve decided to open Lisa as a replacement in 2021 but I’m angry that I’ve completely wasted my time with Help to Buy Isa with no bonus for the money I’ve already saved over the five years.
“I’m also now limited to putting £4,000 a year into the Lisa, so I can’t quickly top up my savings in that account back to the deposit I’ve already saved in the Help to Buy Isa.”
Finder is campaigning for Brits to be able to move their full Help to Buy Isa balances to Lisa in one go and keep the bonus they’ve built up.
Matt Mckenna, personal finance expert at Finder, said: “This will ensure around 2 million people with a Help to Buy Isa can keep their much-needed government bonus and not lose ground in the long agony of saving for their first property.
“It is hard to escape the impression that the public are being punished for the mistakes that were perpetuated in the Help To Buy Isa update, leaving billions of pounds in limbo.
“The Lifetime Isa has effectively replaced it and offers more opportunities to save each year, so why can’t people just transfer their savings into it – and the bonus they were promised?”
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