Use of Help to Buy ISA-backed property deposits slumps

The number of properties purchased using a Help to Buy ISA-backed deposit fell to record lows last year, official data shows.

Government figures have revealed that there were 45,016 homes purchased using the state-backed savings scheme in 2023.

The Help to Buy ISA let savers put money away tax-free towards a mortgage deposit and receive a 25% Government bonus when they are ready to buy.

The product closed to new users in November 2019 and has been replaced by the Lifetime ISA but last year’s figures show fewer than half as many are already using the Help to Buy ISA to get onto the property ladder.

It has helped with the purchase of 592,105 properties altogether.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The Help to Buy ISA had a horrible 2023. As the property market slowed to a trudge, the Help to Buy ISA lagged behind, dragging its feet and complaining. There were half as many purchases using the scheme as there were two years ago.

“It reflects the fact that it has been four and a half years since the Help to Buy ISA closed to new entrants, and although bonuses can be claimed until 2030, the numbers are dwindling fast. As ever with a closed market, the savings rates aren’t much to write home about any more, with the best available for transfers (not restricted to existing customers) offering just 2.75%.”

Coles said the cap on the value of the property you can buy through the scheme is a major issue too.

She added: “Outside London you can only buy a property worth up to £250,000 with a Help to Buy ISA, and the average first-time property is creeping ever-closer to this figure.

“The savings limits haven’t changed either, and after the first month are limited to £200 a month. The government bonus is also capped at £3,000, so if you take full advantage of the scheme – paying in £12,000 and getting a £3,000 bonus – in total you can build a deposit of £15,000. It's only very slightly over 5% of the price of the average property.

“The gradual slide of the Help to Buy ISA also holds useful lessons for the LISA. The limits are more generous here, but unless the government rethinks how they’re set, as house prices rise in the coming years, it risks the same fate.”