Millions of Help to Buy ISA savers miss out on 25% Government boost as house prices rise

As house prices continue to rise, many savers will not be able to benefit from their ISAs as the homes they want to buy are above the threshold.

The 25 per cent bonus is only applicable with property purchases worth £250,000 or less outside of London, or £450,000 in London.

Help to Buy ISAs were introduced in 2015 to help people get onto the property ladder.

However due to rising inflation, more savers will now find themselves disqualified from the 25 per cent bonus.

Since the scheme was introduced, the average house price has increased by 38 per cent, but the threshold has never increased.

Research by Finder also found that the average house prices in 132 of 348 (38 percent) local authorities are currently above the current limit of £250,000.

This is projected to rise to over half (58 percent) of UK regions within four years at current rates.

Help to Buy ISAs were closed to new customers in November 2019, to be replaced with the Lifetime ISA.

As with the Help to Buy, the Lifetime ISA can be opened by anyone aged 18 to 39.

It also offers a 25 per cent bonus on savings used for retirement or buying a first home.

If people pay in the maximum of £4,000 this tax year, the government will give them a bonus worth £1,000.

Those with a Help to Buy ISA can still pay in up to £200 each month.

The government will top up their savings by 25 per cent (up to £3,000) when they buy their first home.

If someone is buying with someone who also has a Help to Buy ISA , both of them will get the 25 per cent bonus. Holders can pay into the ISA until November 2029.

Sophie Barber, 27, from London, opened her Help to Buy ISA in 2016, however has since felt let down by the system.

She said: "House prices kept rising and I quickly realised the £250,000 limit would make it almost impossible to use the ISA in the area I wanted to buy.

"I decided to open a Lisa as a replacement in 2021 but I'm angry that I have wasted my time completely with the Help to Buy ISA, with no bonus granted for the money I'd already saved in those five years.

"I'm also now restricted by putting £4,000 a year into the Lisa so I can't quickly build my savings in this account back up to the deposit contribution I'd already saved in the Help to Buy ISA."

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Finder is campaigning for Britons to be able to move their full Help to Buy ISA balances into a Lisa in one go, keeping the bonus they have accrued.

Matt Mckenna, personal finance expert at Finder, said: "This will ensure that around 2 million people with a Help to Buy ISA can keep their much-needed Government bonus and not lose ground in the long slog to save for their first property.

"It is hard to escape the feeling that the public are the ones being punished for the failings of the Help To Buy ISA being kept up to date, with billions of pounds left in limbo.

"The Lifetime ISA effectively superseded it and offers more opportunity to save each year, so why can't people simply transfer their savings - and the bonus they were promised - into it?"