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Slowdown in Help to Buy ISA property purchases

Slowdown in Help to Buy ISA property purchases
Christina Hoghton
Written By:
Christina Hoghton
Posted:
07/02/2024
Updated:
07/02/2024

In the three months to September 2023, Help to Buy ISAs were used to buy just 12,065 properties, according to new government figures.

It means we are on track for 2023 to see the lowest number of properties ever bought using Help to Buy ISAs, according to analysis from Hargreaves Lansdown.

The Help to Buy ISA has helped with the purchase of 581,167 properties altogether since its launch in December 2015.

It closed to new entrants in November 2019 but remains open to existing Help to Buy ISA holders for additional contributions until 2029.

How it works

The Help to Buy ISA scheme enables people saving for their first home to receive a 25 per cent boost to their savings from the government when they buy a property of £250,000 or less (with a higher price limit of £450,000 in London).

This means that for every £200 saved, first-time buyers can receive a government bonus of £50. The maximum government bonus is £3,000.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “2023 wasn’t a golden year for property in general, but it was a particularly lacklustre one for the Help to Buy ISA. These figures reflect a period when mortgage rates were sky-high, peaking in August, and property sales slowed dramatically across the board. But it wasn’t just the slow market that was to blame.

“These figures reflect the fact that it has been almost four years since the Help to Buy ISA closed to new entrants, and although bonuses can be claimed until 2030, it has been allowed to wither on the vine.

“There’s only one Help to Buy ISA offering more than three per cent at the moment, so rates are significantly lower than elsewhere in the savings market.”

Problem with the property cap

“The cap on the value of the property you can buy through the scheme is a major issue too,” explained Coles.

“Outside London you can only buy a property worth up to £250,000 with a Help to Buy ISA, and the average first-time property is alarmingly close to this figure now.

“The savings limits haven’t changed either, and after the first month are limited to £200 a month – with the government bonus capped at £3,000. It means this will help you build a deposit of £15,000 – which, is only a fraction over five per cent of the price of the average property.”

The average value of a property bought through the Help to Buy ISA is £177,752, compared to an average first-time buyer property price of £242,000 and an average property price of £291,000.