UK savers hoping to open a help-to-buy (HTB) ISA have until 30 November 2019 to do so, although rushing to meet the deadline could end up costing individuals dear, Hargreaves Lansdown has warned.
The financial services experts suggested some people may be better off saving with a Lifetime ISA (LISA) instead.
Hargreaves Lansdown found that the average HTB bonus paid to those looking to buy a property is £920, but revealed the average bonuses paid on their LISAs is £1,424.
Hargreaves Lansdown personal finance analyst, Sarah Coles, commented: “The door is closing on the HTB ISA, which has spurred some savers to dash to get their foot in the door. But before you join the rush, consider your options, or you could end up with the wrong home for your cash.
“Clearly the bumper bonus of free cash from the government is a huge benefit, but the HTB ISA isn’t the only way to get this government top-up. And for some people the LISA is the key to their dream home instead. It offers the same bonus, but you can get it on more of your savings, more quickly, and with more flexibility over what you can buy.”
For those wanting to save more than £2,400 in the first year and £200 a month thereafter, Hargreaves Lansdown said it is not possible to put any more into a HTB ISA, although savers can put up to £4,000 a year into a LISA.
Hargreaves Lansdown warned that if anyone rushed to open a HTB ISA before the deadline to build up £4,000 but then changed their mind, they could still transfer to a LISA – although they’d use up their LISA allowance for that year, so would need to put any saving on hold for a year.
“At the moment, HTB ISA cash interest rates tend to be higher than those on LISAs, but this isn’t necessarily going to remain the case,” Coles added.
“We saw from the Child Trust Fund market that when banks aren’t trying to attract new money to a market, the rates tend to fall. We can’t know whether this is going to be the case with the HTB ISA market, but if it is, you could regret having rushed into it.
“If you dash into a HTB ISA, and change your mind, you can switch into a LISA, but anything you transfer will come out of that year’s allowance. It means the longer you leave it before switching, the more of an impact it will have on your saving plans, so it’s worth making the right call up-front.”
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