Help to Buy Isa usage hits record low

The number of homebuyers putting a Help to Buy Isa towards their property purchase looks set to hit a five-year low.

The latest Government figures show that in the first half of this year just 43,700 people used a Help to Buy ISA to buy a first home, compared with 122,000 for the full year last year. 

If usage continues at the same pace, analysts predict just 87,400 people will be able to use the Help to Buy ISA this year, a drop of more than a quarter on the previous year.

While Help to Buy ISAs are closed to new customers, it is estimated that around 2.5m people still have the accounts where they are saving for their deposit for their first home.

Laura Suter, head of personal finance at investment platform AJ Bell suggested the property purchase limit of £250,000 under the scheme was limiting users.

People using a Help to Buy Isa can only buy a property worth up to £250,000, or £450,000 in London. 

However, since its launch in December 2015 the average house price has risen from £205,000 to £296,000.

Suter said: “Help to Buy Isa usage is on track for its lowest year since 2017, with a combination of a low limit on property, soaring house prices and nervousness about the housing market meaning fewer first-time buyers are able to use the Isa to get on the property ladder.

“There’s no doubt that the frozen property limit on the Help to Buy Isa will put many people off using it. 

“If the limit had risen in line with average UK property prices it would be £360,000 today.”

Suter added that the data only runs until the end of June so likely pre-dates many of the worries about a housing market downturn.

She said: “The drop-off also can’t even be blamed on the recent mortgage market turmoil, which saw rates soar and many delay their house buying plans as a result, as this happened in September. 

“Both of these factors mean we could see an even larger drop in Help to Buy Isa usage this year than expected.”