The number of homes bought using a Help to Buy ISA has fallen by 14% in the first three months of this year to 9,409, compared to the previous quarter as the scheme continues its “slow death”.
Analysis by Hargreaves Lansdown of the latest official figures shows the number of home buyers making use of these legacy savings accounts is dwindling.
The Help to Buy Isa opened in December 2015 and closed to new entrants in November 2019.
The scheme has helped with the purchase of 601,476 properties altogether.
The average value of a property bought through the Help to Buy ISA is £178,012, compared to an average first-time buyer property price of £236,461 and an average property price of £283,000.
Over time the number of savers who still have Help to Buy ISAs is falling as many have opted instead for the Lifetime Isa, which launched in April 2017 with different rules.
It offers much higher potential bonuses for savers, but also has bigger penalties if money is withdrawn for purposes other than buying a house before the age of 60.
Help to Buy ISAs have a lower limit of £250,000 on the price of properties outside London that first-time buyers can purchase through the scheme.
This means anyone who still has one of the savings accounts needs to keep an eye on property price growth to ensure they don’t lose out.
Hargreaves Lansdown head of personal finance Sarah Coles says: “At this rate, we’ll be on track for the worst ever year for the Help to Buy ISA, with its use in property purchases down almost two thirds from the peak in 2021.
“It’s not helped by a relatively sluggish market at a time when mortgage rates were stubbornly high, but the real problem is that the scheme is slowly dying.
“It has been almost five years since the Help to Buy ISA closed to new entrants, and although bonuses can be claimed until 2030, far fewer people are now in the scheme.
“As ever with a closed market, the savings rates aren’t great, with the best available for transfers (not restricted to existing customers) offering just 2.75%.
“It’s not just the lack of availability and the rate that is scuppering the scheme.
“The limits aren’t fit for purpose either, after being set in stone in 2015.
“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 now alarmingly close to this level.
“There will come a time when even those who have hung onto their Help to Buy ISA are forced to ditch it at the last gasp, because they can’t use it for the property they need.
“The savings limits haven’t changed in the nine years the Isa has been running either, and after the first month are limited to £200 a month.
“The government bonus is also capped at £3,000, so if you take full advantage of the scheme – paying in £12,000 and getting a £3,000 bonus – in total you can build a deposit of £15,000.
“It’s only just over 5% of the price of the average property.
“If you’re worried about these limits, it’s worth considering transferring to a Lifetime ISA – as long as you’re aged 18-39 and have at least a year until you want to buy.
“The value of a property you can buy through the scheme is capped at a more generous £450,000, and allows £4,000 to be paid in each year.”
