Help to Buy Isas are on the way out. After November the only option for wised-up home-savers wanting to get their hands on up to £1000 a year of government cash will be the Lifetime Isa.
I commented at Christmas for BBC News Online:
Help to Buy Isas are a bit of a lame duck now, since they will end next year and are being usurped by the more generous Lifetime Isa.
Depending on your point of view, Help to Buy Isas were either a boon or an impediment to young people. For some, it was a groundbreaking product that provided a real boost to first-time buyers, and the first sign of a government taking young people’s financial goals seriously. For others, it was a cynical giveaway for those who could already afford deposits, pushing up demand and propagating a broken housing system.
Either way, it has been ultimately discredited by a sting in the tail – the bonus only being available when contracts were completed, leaving a considerable shortfall in deposits required after exchanging contracts.
In reality, many sellers were prepared to wait on the final deposit, realising that it wouldn’t be worth blowing a house sale on an unfair technicality, but there were many high profile cases where young people had to borrow from elsewhere.
At this stage, they are only suitable for those who are very close to reaching their target deposit (i.e. in the next ten months) or if you’re not really sure you want to buy property – as they do allow you to withdraw your money penalty-free, unlike the Lifetime Isa.
A quick recap: The LISA allows you to save for a home or retirement if you’re under 40. You put it in cash to save for the home deposit and shares when saving for retirement. The government gives you 25% each year up to £4000 (the maximum allowed) until you’re 50. You can then take the money out penalty-free, either when you’re ready to buy a house or at 60 years old. If you want to take the money out sooner, you’ll pay a penalty of 25% on the amount withdrawn.
So what other help is the government providing for those clutching at the bottom rung of the ladder?
To read the full BBC article, click here.