- People could be trapped in Help To Buy Isas with almost 2.2 million open
- 25% government surcharge only payable if users purchase a property under £250,000
- Help to Buy Isas was 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 will 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 increase in house prices since the accounts were created in 2015, more savers will now be disqualified from the bonus.
According to comparison site Finder’s FOI request, the Brits have collectively hidden £5.5bn in these accounts.
The 25 per cent bonus only applies to the Help to Buy Isa when purchasing a property, while the 25 per cent bonus is paid when you save into a Lisa.
Help to Buy Isas were introduced in 2015 to try to help people get up the property ladder. However, they were closed to new customers in November 2019, in favor of the Lifetime Isa.
The key benefit of the Help to Buy Isa came from the fact that the Government would provide a 25 per cent top-up when purchasing a home.
But the £250,000 cap on property prices outside the capital is now a much more limiting factor for its stranded clients than in 2015.
Since then, the median home price has risen 38 percent, but the limit has never increased.
Independent research by Finder found that the median house price in 132 of 348 local authorities is above the £250,000 limit.
The Lifetime Isa or Lisa allows property purchases of up to £450,000 across the UK, although even that limit is proving too low for some buyers in more expensive areas.
Savers can pay up to £4,000 a year into a Lisa each year, compared to £2,400 a year with a Help to Buy Isa. Plus, they get the 25 per cent government bonus while they save, rather than when they buy a property.
It is not possible to combine Lisa and Help to Buy Isa. This means that someone who wants to take advantage of Lisa’s superior benefits would have to transfer her money.
Even so, they won’t be allowed to transfer it all at once as it is only possible to transfer up to £4,000 per year and this comes with the cost of adding new money to Lisa.
Sophie Barber, 27, from London, is someone who feels let down by the Help to Buy Isa scheme. Sophie opened the Help to Buy Isa in 2016 to save to buy her first home.
“House prices continued to rise and I quickly realized that the £250,000 limit would make it almost impossible to use the Isa in the area I wanted to buy,” Sophie said.
‘I decided to open a Lisa as a replacement in 2021, but I’m angry because I’ve completely wasted my time on the Help to Buy Isa, with no bonus awarded for the money I’d already saved in those five years.
“I am also now restricted from depositing £4,000 a year into Lisa, so I cannot quickly build up my savings in this account up to the deposit contribution I had already saved in the Help to Buy Isa.”
Finder is campaigning for Brits to be able to transfer all their Help to Buy Isa balances to Lisa in one go, keeping the bonus they have built up.
Matt Mckenna, personal finance expert at Finder, said: “This will ensure around 2 million people on the Help to Buy Isa can keep their much-needed government bonus and not lose ground on the long road to saving for their first property.”
‘It’s hard to escape the feeling that the public are the ones being punished for the failures of the Help To Buy Isa update, with billions of pounds in limbo.
‘The Lifetime Isa effectively replaced it and offers more opportunities to save every year, so why can’t people simply transfer their savings – and the bonus they were promised – into it?’
