Help to Buy ISA cannot be used for a house deposit

 

It has emerged first-time buyers cannot use the Help to Buy ISA to boost their deposit, as it transpires that the Government bonus will not be paid out until after the house has been purchased.

 

Help to Buy ISA’s were set up by George Osbourne in his 2015 budget and were designed to help those renting save for a house by topping up their savings with a 25% Government contribution. 

 

However the Government included a clause which states the top-up will not be paid out until after the house is bought and the sale is completed- meaning that buyers will still need to save up the full deposit by themselves. 

 

A maximum of £200 can be saved monthly (with a £1,000 deposit) up to a final amount of £12,000. The Government will then pay out £3,000 if that balance is being put towards the purchase of a house.  

 

The Telegraph reported that the Treasury has claimed that the Government bonus is only meant to cut the size of savers’ mortgages by increasing the equity they put in after completing. The Treasury has structured the scheme so that people won’t benefit from the extra cash and then use the money for something other than buying a house.  

 

Debt Advice Foundation CEO David Rodger said of the reports;

 

“We welcome any scheme which encourages people to save for the future. However, if buyers are unable to use these savings for a house deposit they may turn to loans and other channels of credit to fund the deposit, whilst also still trying to save the £200 per month to get the Government pay out. This would place them in an extremely precarious financial situation. 

 

“I would also question if there was any proof required that they used the ISA money to clear some of their mortgage after the house sale. After already saving the deposit and being accepted for a mortgage, the incentive to spend this money wisely must be greatly reduced, especially if they would be faced with early repayment charges by doing so.”