Use it or lose it: Boost your deposit with a Help to Buy ISA before it’s too late

With only three weeks to go until the Help to Buy ISA is pulled, budding homeowners are being urged to sign up now to maximise their deposit.

The Government savings scheme provides a way for first-time buyers to set aside cash for their deposit whilst earning interest. It has the added benefit of paying out a 25% bonus at the completion of your home purchase.

Savers can put away up to £200 a month and the maximum bonus they can receive is £3,000.  So someone saving £4,000 would receive a cash bonus of £1,000, for example.

Deadline

But with the scheme due to close on 30 November, there is very little time for people keen to benefit from the bonus and the savings rates to take advantage.

As such, financial experts are urging anyone saving for their first home to open a Help to Buy ISA account quickly.

For, although the scheme is closing to new applicants, those who sign up before the deadline can continue paying into it for another ten years and they have until December 2030 to claim the Government bonus.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Homeownership may still feel out of reach to many consumers, despite a healthy savings habit, which is why any boost to their deposit would be a welcome addition.”

According to Moneyfacts, the average deposit for first-time buyers is currently just over £41,000 – which represents a fifth of the average house price in the UK.

Research by Halifax and YouGov discovered, for two thirds of non-homeowners, raising a deposit was a major hurdle.

So, any help first-time buyers could get – especially in the form of interest payments and Government bonuses – will be valuable to many.

Alternatives

There is an alternative for deposit savers who have missed out on the Help to Buy ISA, this comes in the shape of the Lifetime ISA (LISA).

However, Springall said while the LISA offers a 25% bonus the interest rates on offer are not currently as high as for the Help to Buy version. Click here to find out more about the LISA.

Moneyfacts said the average rate on offer for the Help to Buy ISA is currently 2.41% which compares to 1.2% for the LISA.

She added: “Unlike Help to Buy ISAs, a Lifetime ISA could penalise savers for withdrawing their cash as it only allows access for buying a home, or once they turn 60 or become terminally ill.

“However, savers who are adamant that they will be using a Lifetime ISA may not find much choice.”