Help to Buy ISAs (ISA)

More than 500,000 savers have opened Help to Buy ISAs after being told by George Osborne that it provided “direct government support” for those saving for a deposit, as a way of getting “Generation Rent” on to the housing ladder. It emerged late last week that these savings will not be able to be used as part of the initial deposit for their home purchase (ISA).

Unbeknownst to savers and institutions alike it has begun to emerge that the 25% government top up on the savings cannot be accessed until completion (ISA).
This effectively renders the scheme useless as savers will still need to access the equivalent to the saved bonus from family or other sources until the property has been bought.
The small print means the bonus cannot be used for the initial deposit, and can only be spent as part of the purchase cost, for example on mortgage payments, once the deal is completed.
The Treasury has been forced to admit that the clause was included to stop people benefiting from the bonus without actually buying a house.
The accounts, which were launched last year, let customers save £200 a month to which the Government adds £50, up to a final total of £15,000.
So far fewer than 1,500 people have used them to help buy a home as the limit on how much can be paid in means they have only just accrued a realistic amount to put toward a deposit.
Sources at high street banks said they were unaware of the restrictions, which state: “The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.”

Key points:
A maximum of £200 can be saved monthly, plus a £1,000 initial deposit
When the Isa balance is put towards buying a house, the Government adds a 25pc bonus
The bonus is paid out on a minimum balance of £1,600 and a maximum balance of £12,000
To save enough to claim the full £3,000 bonus would take an individual 55 months, not accounting for interest earned
The Isas are easy access and generally offer comparatively high rates, but these are variable meaning they are subject to change
Can only be used on sub £450k properties in London and sub £250k properties outside the capital
To qualify for the 25pc bonus the property must be in the UK and cost up to £250,000 (£450,000 if buying in London). It must not be a second home or a buy-to-let property and must be purchased with a mortgage.