Average UK house price out of reach for first-time buyers using Help to Buy ISA

24 May 2022

Ahead of the March 2022 UK House Price Index which will be published on Wednesday 18 May 2022, it is likely there will be a further uptick in the value of residential properties or at least prices remaining steady.

As of February 2022, the average house price in the UK is £276,755, with property prices rising over 10 per cent compared to the previous year. Demand in the housing market has remained strong, particularly among first-time buyers. 

However, the government’s Help to Buy ISA has failed to keep up the same pace for savers. When buying a property using the Help to Buy ISA, the value of the property must be less than £250,000 (or £450,000 in London), which has been unchanged since it was introduced in December 2015. For buyers in some parts of the UK, that puts their first home out of reach if they want to use their existing savings in a Help to Buy ISA.

The Help to Buy ISA scheme has been closed to new applicants since 2019, but savers can keep their accounts until November 2029 and claim the 25 per cent bonus until November 2030.  

Savers with more immediate needs can use a Lifetime ISA (LISA) instead to buy their first home. The LISA provides a greater limit on the property value of up to £450,000 across the whole of the UK, which is a more realistic approach for many.  

Individuals can add up to £4,000 to the LISA each year, and the government will still add a 25 per cent bonus to savings, up to a maximum of £1,000 a year. Any returns on the ISA investments continue to benefit from tax exemption. Another difference between the two ISAs is that the Help to Buy ISA had a maximum limit of £12,000 and a maximum government bonus of £3,000, whereas the LISA allows for greater savings and a maximum government bonus of £33,000 – if it is maxed out every year from age 18 to 50.  

Savers with an existing Help to Buy ISA should look to act now to make sure they don’t miss out, as they can transfer their existing savings to a LISA to access the higher limit on the property purchase price and a larger government bonus along the way.