Thousands of first-time buyers have raised concerns about their Help to Buy ISA after it was clarified that the government’s bonus could not be used as part of a deposit.
When the scheme was launched by the former chancellor George Osborne he said it would provide state support to help buyers get on the property market, an announcement which encouraged more than half a million hopeful first-time buyers to put their money into the new ISA.
Using a Help to Buy ISA savers can put away a maximum of £200 a month, plus an initial deposit of up to £1,200 and when the ISA balance is put towards buying a house the government adds a bonus of 25 per cent.
Paid out to first-time buyers on a minimum balance of £1,600 up to a maximum of £12,000, the bonus effectively boosted saving by up to £3,000.
However, despite the former chancellor’s promise of direct state support for those saving for a deposit, a rule within the scheme prevents the government bonus being paid out until completion of the sale.
House buying expert Andrew Boast, of SAM Conveyancing, said: “It is a scandal. The government launched this scheme declaring it was to help people save the large exchange deposit required to buy a home. But what first-time buyers are now being told is that they cannot use the bonus as part of this deposit.”
A Treasury spokesman said: “The government has published clear guidance and the industry is fully aware that the bonus is only paid on completion. Since Mr Osborne announced the scheme, more than 500,000 savers have opened Help to Buy ISA accounts.”