Since its launch in December, 555,000 people have opened up Help-to-Buy Individual Savings Accounts (ISAs), figures from the Treasury have revealed.
The Help-to-Buy ISA enables first-time buyers to receive money from the government to help them afford the deposit on their first property, and save money free of tax.
Using the money to purchase a home means the saver receives 25 per cent from the government. If they have saved up the maximum of £12,000 in their ISA, they can receive £3,000 from the government to spend on their first property, essentially leaving them with £15,000 to spend on a house.
Each month, those who have opened a Help-to-Buy ISA are allowed to save up to £200. This means it will take five years to reach the £12,000 cap for those who save the full £200 every month.
To receive the government bonus when they ‘cash in’ the Help-to-Buy ISA, savers must have a minimum of £1,600 in the account. So far, 2,090 people have cashed in – some of whom were joint buyers – with 1,490 properties bought using these funds.
Danny Cox of Hargreaves Lansdown, an investment provider, said: “For the time being, HTB ISA is a no-brainer for those saving toward their first home, even if ultimately their savings are used for a different purpose.
“However, from April 2017, the Lifetime Isa (Lisa) will become the savings scheme of choice.”
The HTB ISA is not the only Help-to-Buy scheme available from the government, to help people get onto the property ladder. The Help-to-Buy Mortgage Guarantee Scheme and Help-to-Buy Equity Loans are also possibilities for first-time buyers.