02 December 2015

What does the new Help to Buy: ISA mean for first time buyers?

The Help to Buy: ISA was announced in the March 2015 budget, and arrived at the start of December. It’s a new scheme to help first-time buyers save for a deposit. The Government will add 25% extra to your savings balance, up to a maximum of £3,000 (if the eligibility criteria are met), when you use the money saved towards the purchase of a new home.

Nationwide launched its Help to Buy: ISA product on 1 December. We asked Andrew Baddeley-Chappell, Nationwide’s Head of Policy for Mortgages and Savings, to explain how and why the Help to Buy: ISA initiative was launched, and how Nationwide’s Help to Buy: ISA can help first-time buyers to save for a deposit without compromising other cash ISA savings.

Why have the Government brought in the Help to Buy: ISA?

“The new cash Help to Buy: ISA is the latest in a series of 'Help to Buy' schemes from the Government to help people get onto the housing ladder. Given the shortage of housing in many parts of the country, house prices are high meaning that the size of mortgage deposits is large.”

“Across the market as a whole we have seen around 1.5 million fewer first-time buyer mortgages than we would normally in the years after the credit crunch in 2007.”

How much will the Bonus from the Government help?

The maximum Government Bonus is £3,000 per ISA. To get the maximum Bonus you would need to save £12,000 which would take just over 4 1/2 years given the £200 maximum subscription per calendar month.

When is the Bonus paid?

When you are ready to purchase your property, you must close your Help to Buy: ISA, and provide your closing statement to your conveyancer, who will claim the Government Bonus on your behalf.

Why should a first-time buyer choose a Nationwide Help to Buy: ISA?

Each tax year, you can only choose one provider to have cash ISAs with. So if you have a Help to Buy: ISA, you need to consider the Help to Buy: ISA limits that restrict you to putting in £3,400 in the first year and £2,400 per year after that. At Nationwide, you can hold our Help to Buy: ISA product, and use the rest of your annual ISA allowance to save in another of our cash ISA products, within the Nationwide cash ISA wrapper. This means you can make use of the full annual ISA allowance, which this year (2015/2016) is £15,240.

How does Help to Buy: ISA fit in with Nationwide’s existing savings products?

“Help to Buy: ISA works in a similar way to Nationwide’s own Save to Buy scheme, which we’ve been successfully operating for over 4 1/2 years.” Braddeley-Chappel continues, “Both products are designed to support people who want to plan ahead and save for their future home purchase.”

We closed our existing Save to Buy savings product to new customers when we launched our Help to Buy: ISA product. But, existing Save to Buy customers who are eligible for a Help to Buy: ISA will be able to transfer their savings over if they choose to (up to the maximum monthly deposits). And they also have the option to keep both products open and mix and match how much they save in each one, subject to the account limits.

Fact file: Help to Buy: ISA

  • It can be used for a mortgage on a property costing £250,000 or less (up to £450,000 in specified London boroughs).
  • To open this account you must be aged 16 or over, be an Eligible Customer and not a Residential Property Owner as set out in the Scheme Rules.
  • You can save up to £200 per calendar month – plus up to an extra £1,000 in the calendar month of your first deposit.
  • It can’t be used for buy-to-let or overseas properties (with the exclusion of Forces personnel).
  • You can’t open a cash ISA and a separate Help To Buy: ISA in the same tax year (although with Nationwide’s ISA wrapper, you can save in multiple cash ISA products in a tax year).
  • If you are a first time buyer but you would like to purchase a property with someone who isn't a first time buyer, you can still claim your Bonus payment from the Government.
  • If you are buying together with another first time buyer, for example you are a couple, you could get two Bonus payments from the Government if you each save in a Help to Buy: ISA.

Thinking of buying your first property?

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