Why are rates much higher on a H2B ISA than an ordinary ISA? ISA?

linkliter

That being the case why would anyone who had never owned a house not open a H2B ISA in preference to an ordinary ISA even if they never intend to buy a house?

eskbanker

It's the same principle as regular saver accounts - institutions can afford to offer tempting headline rates when the monthly contributions are capped to £200, limiting their exposure.

There's nothing to stop people using them in the way you describe but unless using one of the providers offering the split ISA concept, paying into an HTB prevents concurrent funding of another cash ISA with the other 88% of the annual allowance....

Gordon_the_Moron

They offer higher rates as

1. The amount you can put in is somewhat limited (hence why the best LISA offers an interest rate around 45% lower than the best H2BISA)

2. They want you to take out their mortgage and will loss lead for that custom.

In answer to your question about why anyone would choose a standard ISA here is my strategy as someone who has never owned and sometime will.

Max out LISA annually

Pay £200 a month into Nationwide H2B (I'm not sure which one I'll use when I buy a house yet. I'll make that decision later. If I use LISA I lose the H2B bonus but don't have to wait to get all the money)

Get the best rates I can elsewhere on my money in non ISA accounts but chuck it all into a Nationwide split flexible cash ISA at the beginning of April and withdraw it on the 6th.

That is the most profitable way I can see to use ISAs. Most people cant be arsed with such a complicated arrangement though :money: :money: :money: