The latest findings from Halifax and YouGov has found that two-thirds (64%) of non-homeowners felt that raising a deposit remains a hurdle, despite initiatives launched by the Government to help boost savers’ deposits, such as the Help to Buy ISA and Lifetime ISA.
With just over three weeks left to open a Help to Buy ISA before the scheme closes to new investors, the latest analysis from Moneyfacts.co.uk emphasises the importance on why first-time buyers would be wise to take advantage, even if they have just £1 to open one, as they could have their deposit boosted by up to £3,000.
Once the Help to Buy ISA scheme closes on 30 November, savers would need to turn to the Lifetime ISA to get a 25% Government bonus on their deposit. However, should consumers find later on that they are not eligible for the bonus, then they will face penalties for withdrawing their cash. Savers can also earn more interest with a Help to Buy ISA, 2.41% on average (based on the top 10 best rates), versus 1.20% on average on a cash Lifetime ISA.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “Homeownership may still feel out of reach for many consumers, despite a healthy savings habit, which is why any boost to their deposit would be a welcome addition. Savers can get a max boost of £3,000 with a Help to Buy ISA and up to £1,000 a year with a Lifetime ISA, and recent research suggests they may well need this extra cash more than they may know.
“Indeed, with the average deposit for those buying their first home hitting £41,099, this represents under a fifth of the average house price in the UK of £224,709. In fact, according to the analysis from Halifax and YouGov, a decade ago first-time buyers had a much smaller deposit (£27,059), but this made up 20% of the average house price of £138,413.
“Unlike Help to Buy ISAs, a Lifetime ISA could penalise savers for withdrawing their cash as it only allows access for buying a home, or once they turn 60 or become terminally ill. However, savers who are adamant that they will be using a Lifetime ISA may not find many choices.
“Still, someone without any financial support from their family or a partner to buy a home with may feel like homeownership is unlikely ever to happen and could feel as though they will be renting for life. Hopefully, this will not be the future for everyone who does desire their own home, but to combat this outlook, taking advantage of any Government schemes to help them onto the property ladder is wise.”