More than 500,000 first-time buyers let down by ‘Help to Buy’ scheme as it emerges ISAs cannot be used for deposits
Small print says government help can only be used as part of purchase cost of property rather than deposit
THE much-trumpeted Help to Buy Isa was branded a “scandal” last night as it emerged that first-time buyers will not be able to use it for a deposit.
More than 500,000 savers opened accounts after George Osborne claimed it would provide “direct Government support”.
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But it has been revealed that a flaw in the scheme means a 25 per cent Government bonus on savings will not be paid out until a house purchase has been completed.
Experts said those struggling to find the money to buy a home would have to look to their parents for loans.
The Help to Buy Isas, which launched last year, let customers save £200 a month, to which the Government adds £50, up to a final total of £15,000.
Buyers are usually required to provide a ten per cent deposit when they exchange contacts.
But the small print shows the bonus cannot be used for the initial deposit and only spent as part of the purchase cost.
So far, fewer than 1,500 people have used the Isas to help buy a home as the limit on how much can be paid in means they have only just got a realistic amount to put toward a deposit.
Andrew Boast of SAM Conveyancing said: “It is a scandal. Unsuspecting first-time buyers are finding that they can’t use the bonus as part of the deposit.”
Danny Cox of Hargreaves Lansdown financial advisers said: “Hundreds of thousands of Help to Buy Isa savers risk finding a last-minute hole in their finances.”
A Treasury spokesman said: “It has always been the case that money saved in a Help to Buy Isa is for an exchange deposit, with the bonus of up to £3,000 per Isa going toward the total funds available for the property transaction.”