When Anupam and Shrabanti purchased their first home in Manchester for £325,000, they were disappointed to learn that they would be forfeiting £6,000 in free cash. The couple exceeded the purchase limit for the Help to Buy Isa, which is set at £250,000 for homes outside of London. They had saved the maximum of £12,000 each in their account and would have been eligible for a £6,000 bonus if their home had been under £250,000. The average house price in the UK is now around £279,569, according to Halifax.
The Help to Buy Isa and its limitations
The Help to Buy Isa is an account designed to help first-time buyers save for their first home and offers a bonus worth up to £3,000. However, the limit for claiming the bonus is set at £250,000 for homes outside of London and £450,000 for homes in London. Since the introduction of the scheme in 2015, house prices have increased significantly, but the limit has not been adjusted to reflect this. MoneySavingExpert founder Martin Lewis has previously called for the limit to be raised to prevent first-time buyers from missing out on valuable cash.
The replacement – the Lifetime Isa
The Help to Buy Isa scheme closed to new applicants in November 2019, but those who already have an account can continue paying into it until November 2029 and claim the bonus until 2030. It has been replaced by the Lifetime Isa, which is available to anyone aged 18 to 39. When you open a Lifetime Isa, the government adds 25% to your savings, up to a maximum of £1,000 a year. This means that if you save £4,000 a year, you will receive a £1,000 bonus to put towards your first home. The Lifetime Isa can be used to buy homes worth up to £450,000, both in and outside of London.
Don't miss out on free cash
While the Help to Buy Isa and Lifetime Isa are helpful tools for saving towards a first home, it is important to keep the limitations in mind. Consider the maximum purchase price and eligibility requirements when planning your savings. This way, you can ensure that you don't miss out on any potential free cash that could be put towards your dream home.
Anupam and Shrabanti managed to develop good saving habits during lockdown and saved around £5,000 by cutting back on discretionary spending. They were able to use these savings towards their deposit and purchased their dream home in Belle Vue, Manchester.
