‘It's a stretch to call Help to Buy ISA a success’

interactive investor's senior personal finance analyst Myron Jobson considers the scheme.

• Since the launch of the Help to Buy ISA (H2B ISA), 460,567 property completions have been supported by the scheme according to the latest HM Treasury figures.
• 604,720 bonuses have been paid through the scheme (totalling £674 million) with an average bonus value of £1,115.
• The mean value of a property purchased through the initiative is £175,680 compared to an average first-time buyer house price of £225,607 and a national average house price of £269,945.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “It would be unfair to call the Help to Buy ISA a failure, but it would be a stretch to call it a success. Every little helps when it comes to purchasing a home, but the average bonus of £1,115 barely covers home survey and legal fees as well as other costs associated with buying a property.

“The initiative fell by the wayside following the introduction of its spiritual successor the Lifetime ISA, which offers more generous benefits for those who know without a shadow of a doubt that their savings will be used towards purchasing a property.

“That said, there is now a dizzying array of ISAs available on the market – a simple tax wrapper has become complicated. For example, with the Lifetime ISA taking centre stage from the H2B ISA, many savers who opened a H2B ISA have seemingly forgotten they have one, with a great number of these ISAs sitting dormant and waiting to be brought back to life.

“While the account was designed to help those saving up to buy their first home, the fact that you can withdraw money from the account at any time and for any reason and still get to keep the interest earned on your savings, makes it a decent alternative savings account. Interest rates offered on H2B ISAs outstrip those offered on mainstream cash ISA accounts – although contributions are restricted to £200 a month.

“Crucially, the H2B ISA counts as a cash ISA and you can only pay into one of these in the same tax year.

“The plight of wannabe first-time buyers has become more acute amid the cost-of-living squeeze, which has forced many to withhold funds that were otherwise destined for their house deposit kitty to shore up their financial position amid ballooning inflation. The erosive effect of inflation on the purchasing power of cash savings further increases the burden of accumulating a large enough deposit. Add to that rising house prices fuelled by the ongoing demand-supply mismatch for property, and first-time buyers still face an uphill struggle to get on to the property ladder.”