An investigation by The Nottingham Building Society has revealed a third of people saving to get onto the property ladder were not aware of the financial benefits of Lifetime and Help to Buy ISAs, and less than a third were using them.
Currently the Government offers a top-up of 25% to first-time buyers saving with a Lifetime ISA (LISA). Savers can invest up to £4,000 a year in these vehicles which means there is the potential to receive a bonus of as much as £1,000 each year.
Meanwhile savers can also benefit from a Government bonus if they use the Help to Buy ISA, which allows them to put up to £200 a month in the tax-free product. A 25% bonus is applied for up to £3,000.
Financial sacrifices
Yet, many would-be first-time buyers who are making cut-backs and sacrifices in a bid to pull together their deposit are not even aware these schemes exist.
Indeed, the Nottingham’s research discovered one in four had moved back in with parents to maximise their savings and 30% had stopped going on costly holidays.
A huge 61% had cut back on socialising and 12% had postponed starting a family or getting married while 7% sold their car and relied on public transport in order to release additional cash.
Simon Taylor, chief operating officer at The Nottingham, said “Our research shows people are making financial sacrifices to get on the ladder and they deserve some help.
“Thanks to significant bonuses available, paying into a Government-backed savings account, such as Lifetime or Help to Buy ISA, will enable first-time buyers to save a deposit more quickly or put down a larger deposit, which can increase their options.”
How much you need to save
The Nottingham is one of only two providers offering the LISA and said customers could open an account with just £10, face-to-face at one of its branches. Its LISA also offers 1% tax-free interest per year.
Calculations show that an individual requiring a 10% deposit for a home worth £184,000 would need to save £18,400.
If they saved the maximum amount using a The Nottingham’s LISA, which pays 1% interest, they would have a balance of over £20,000 in four years.
A couple, meanwhile, could reach this total in just over two years.
The Nottingham is now offering first-time buyers who are saving with its ISA additional support by providing free access to its mortgage service, which usually costs £249,
Taylor added: “The help isn’t just for there for first-time buyers either as the Lifetime ISAs can be used by savers wanting to boost their retirement savings also.”
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