Are help to buy ISAs dead?

LordChill

My daughter has a help to buy ISA with Barclays Bank.  All help to buy ISA offer “Pants” interest rates of ~2.5% compared to other ISAs of say 4.5% - 5%

Furthermore the limit for a help to buy ISA house purchase limit is stuck at 250k (450k London)  The average house price in the UK is now £270k as of 2025.

So in reality the Help to Buy ISA is dead, unless you are going to purchase a house at the lower end of the market.  More and more people cannot realistically use their help to buy ISA as it was intended thanks to inflation and the purchase price limit being frozen since 2015 when the average house price was £194K

I am thinking she is better off transferring out of her Help to Buy into a standard ISA and forget about the government bonus.  Although I think she may be able to transfer £4k over into a LISA each year allowing her to purchase up to the value of £450k but I hear bad press about LISAs.

I think it is terrible that the Help to Buy has been left to stagnate by both the government and the banks. 

A simple fix would be to allow the total savings within a Help to Buy ISA to be transferable into a LISA not limit this to 4k a year, or even better still raise the purchase price limit from £250k to £450k in line with the LISA

 

What do people think?

SFCooper

Most definitely so

masonic

LordChill said:

A simple fix would be to allow the total savings within a Help to Buy ISA to be transferable into a LISA not limit this to 4k a year, or even better still raise the purchase price limit from £250k to £450k in line with the LISA

This was exactly what was offered for a period spanning two tax years when LISAs were introduced, essentially to replace the HTB ISA. However it was a one time offer and those who didn't take it up, or opened their HTB ISA in the period after that but before they closed to new customers, are stuck transferring £4k per tax year, which is still worth doing if a few years from completing on a first time property purchase.

What I never understood was why HTB ISAs were allowed to run for over a decade after their sell by date. A few years would have been reasonable, but by now they ought to be officially dead.

That said, they were always intended for those buying their first home, which tends to be on the cheaper side of the market. £250k will get you a very nice home in many parts of the country. Would have made sense to set at the median house price at launch and then index link so it would be £270k today (and about £480k based on outer London).

LordChill

masonic said:

LordChill said:

A simple fix would be to allow the total savings within a Help to Buy ISA to be transferable into a LISA not limit this to 4k a year, or even better still raise the purchase price limit from £250k to £450k in line with the LISA

This was exactly what was offered for a period spanning two tax years when LISAs were introduced, essentially to replace the HTB ISA. However it was a one time offer and those who didn't take it up, or opened their HTB ISA in the period after that but before they closed to new customers, are stuck transferring £4k per tax year, which is still worth doing if a few years from completing on a first time property purchase.

Ah thats a shame she missed that, although in fairness the LISA started in 2017 and as such the inflation crept up on her over the years. 

p00hsticks

LordChill said:

Furthermore the limit for a help to buy ISA house purchase limit is stuck at 250k (450k London)  The average house price in the UK is now £270k as of 2025.

So in reality the Help to Buy ISA is dead, unless you are going to purchase a house at the lower end of the market.  

But wouldn't you expect first time buyers to be buying a property 'at the lower end of the market' ? 

vacheron

Regarding the £250K limit, I agree with @masonic (and @p00hsticks who posted while I was writing this) that a helping hand scheme generally aimed at first time buyers is not dead simply because it can't buy the "average" home.

I would imagine that the majority of first time buyers are not buying the average home as this will statistically be most people's second, or possibly third, home. Averages are also skewed by the small number of hugely expensive properties. (There could be 10 houses sold at an average of £200K, but one single £1m house sale would pull the "average" house price up to £270k).

Also, while I do have sympathty for the indviduals who find themselves caught in the current economic environment, I have always disliked the industry approach of finding "innovative" ways to allow people who can't afford homes in an over inflated housing market to buy these homes they can't afford (incluiding government help to buy schemes and also things like "helping hand" and "springboard" mortgages) as this does nothing to subdue demand at the lower end of the market which would allow the prices to return to more reasonable levels.

eskbanker

LordChill said:

I am thinking she is better off transferring out of her Help to Buy into a standard ISA and forget about the government bonus.  Although I think she may be able to transfer £4k over into a LISA each year allowing her to purchase up to the value of £450k but I hear bad press about LISAs.

But the key question for her is whether or not the LISA is a suitable product for her requirements - it's a better product than HTB in many ways, but does have some clearly-published restrictions that may or may not influence her decision.

Ch1ll1Phlakes

LordChill said:

I am thinking she is better off transferring out of her Help to Buy into a standard ISA and forget about the government bonus. Although I think she may be able to transfer £4k over into a LISA each year allowing her to purchase up to the value of £450k but I hear bad press about LISAs.

I think it is terrible that the Help to Buy has been left to stagnate by both the government and the banks. 

With the recent report from the Treasury Committee, possible changes to Lifetime ISAs may be in the pipeline (here's hoping as I have one myself) however I don't think Help to Buy ISAs are inherently bad. I still have one though am contemplating moving it to my LISA. However the LISA withdrawal penalties are putting me off for now so I will wait to see if any changes are announced in the Autumn statement. 

masonic said:

What I never understood was why HTB ISAs were allowed to run for over a decade after their sell by date. A few years would have been reasonable, but by now they ought to be officially dead.

While Help to Buy ISAs could be viewed as stagnated or past their sell by date, they still offer greater withdrawal flexibility than a Lifetime ISA with the same bonus on house buying (to the 12k extent). For me I opened mine when I was in my teens and won't be 30 before the Help to Buy ISA bonus is extinct (2027). So the need for the product to run for ten years is necessary for people like me cause there was no way I could buy a house so early on and the Lifetime ISA withdrawal penalty again did not suit me when I needed access to my savings at uni.

LordChill said:

A simple fix would be to allow the total savings within a Help to Buy ISA to be transferable into a LISA not limit this to 4k a year, or even better still raise the purchase price limit from £250k to £450k in line with the LISA

Again this would be great but only if the withdrawal penalty was reduced to 20% (as recommended in the report). Many first time buyers don't have massive savings and need some sort of access to them if an unexpected event was to arise.

Jami74

I used my HTB ISA last year after years of thinking I should ditch it (required a relocation to find a property I could afford/less than £250k). If I'd had a bigger deposit/help from family I'd have bought a more expensive property.

One offspring has a LISA and will hopefully be able to use it before starter homes exceed £450k.