H2B Isa now at maximum £12k saved- now what?

cfdmaxted

Hi,
I’ve just made my last payment into my help to buy ISA , so it is maxed at the £12k. I,m not ready to buy a house right now as live in London and even this amount isn’t going to be enough.  So, do I just leave my ISA where it is? If they reduce the rates are any other companies going to want to offer better rates or be prepared to transfer it as I won’t actually be saving in anymore? Are there limits on how long I can leave my money sitting in the ISA before I use it on a house purchase.  And finally is it worth me continuin* to save into the ISA even though it won’t improve the government bonus- are there any benefits to this people have found such as their existing provider offer them the same higher interest rate 2.25% currently.
thanks

bowlhead99

Similar question to the one a few days ago "Help to Buy ISA full... what now?"
(https://forums.moneysavingexpert.com/discussion/comment/77073503#Comment_77073503)

If you're under 40 you could contribute up to £4k each tax year to a Lifetime ISA which doesn't have the cap on the total amount of bonus you can get from it, so if you opened one this week and put in the £4k this April and same again Apr '21 and Apr '22, you'd have made £12k of contributions, and the year after that, you'd have made £16k, and so on - and you would continue to get bonuses on all the contributions thereafter. Realistically you won't be buying in London with a £15k (including bonus) deposit, so presumably you plan on saving for a while yet, so it might be worth using that scheme instead (you can only use the bonus from one or the other to buy the property).

The downside is that if you decide to abandon the LISA scheme and take your money out without using it to buy a qualifying property,  and you don't want to leave it in as a retirement fund to age 60+, you pay a penalty which is effectively giving them back the bonus they credited to the account plus a bit extra.

On your specific questions:

  If they reduce the rates are any other companies going to want to offer better rates or be prepared to transfer it as I won’t actually be saving in anymore?

- yes companies will allow transfers-in, and may offer decent rates because it is only a relatively small amount of money (for example, you won't have many tens of thousands in there, because you can only add £200pm). It is easier for banks to pay tempting high rates when the total amount of money that the account accepts isn't very high and the rate you can put money in is slow, their marketing teams quite like this as it attracts people to the bank even though they are not paying out the high rates on massive sums.

 Are there limits on how long I can leave my money sitting in the ISA before I use it on a house purchase?

- HTB ISAs won't expire for a long while - they will stop being an ISA and lose the benefit of being able to claim a bonus in November 2029. You don't need to keep adding money to keep the account status, you can just let it sit.

And finally is it worth me continuin* to save into the ISA even though it won’t improve the government bonus- are there any benefits to this people have found such as their existing provider offer them the same higher interest rate 2.25% currently?

- You're right that the rates are quite good as mentioned above because
(a) it's cheap for the banks to do it, because the amount of cash you can add to them is limited and 2% on a small amount of money is not a lot of pounds, and

(b) the accounts are instant access so you could move at any time, but in practice you're not going to dip into the account for spending money because you'll lose the bonus, so the funds are relatively secure for them unless you decide to change bank for a better rate or you actually buy a property

(c) they are hoping that if you stay with them you might be more likely to use them for a mortgage etc when the time comes, which will earn them some nice profits

You'll find that most other accounts do not pay as high a rate for potential instant access. So if you still qualify to hold and add to the account (i.e. you haven't already bought a property), it can be a good idea to keep using it to store most of your deposit, even if you're not getting bonuses on the new money.