"Runaway" house prices risk overtaking Help to Buy ISA limits

“Runaway” house prices risk overtaking Help to Buy ISA limits

Experts now fear that “runaway” house prices are overtaking Help to Buy ISA limits, leaving many buyers unable to proceed.

September figures show that the average price of a property bought through the Help to Buy ISA scheme was £175,680, compared to an average first-time buyer house price of £225,607 and a national average house price of £269,945.

Since then, the national average has risen to a record high in December of £274,712 – up £27,000 in a year, and the average first time property costs £228,627.

But those using a Help to Buy ISA to buy a property, are effectively unable to buy properties worth more than £450,000 within London or £250,000 elsewhere.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, commented:

At times like this, first-time buyers need government schemes more than ever, so it’s a real kick in the teeth that many will get to the point of buying a property and discover they can’t take advantage of the bonus.”

When the Help to Buy ISA was launched in December 2015, the average price paid by a first-time buyer was less than £175,000, so the limit of £250,000 (and £450,000 in London) gave buyers plenty of scope to find the home they wanted. But in the seven years since, the average first-time buyer price has risen more than a quarter to over £225,000 and the limits haven’t moved to accommodate this.

Coles continued:

We’re getting perilously close to the day when nobody using the scheme can afford to buy an average starter home. It means that people who started a Help to Buy ISA in good faith back in 2015 could get to the point of purchase and realise they won’t get the bonus they were expecting.

The government needs to reconsider the limits on the Help to Buy LISA, and the Lifetime ISA. Setting a fixed limit and then walking away to leave buyers to wrestle with rising prices isn’t good enough. Overall limits need to be linked to house price inflation, so buyers know they won’t be getting into a scheme they could be forced out of by a hot property market.”

Financial advisors are now recommending that prospective buyers falling within the 18-39 age category take advantage of the Lifetime ISA which allows £4000 per year deposits and is topped up by the government by an additional 25%, to help overcome current Help to Buy ISA constraints.

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