Halifax leads the way with a 4pc home-buyer Isa

FIRST-TIME buyers have been given a major boost after Halifax announced it would pay 4 pc on the new Help-to-Buy isa. this is the first time an adult isa has hit 4 pc for six years.

However, as predicted last week by Money Mail, some banks are refusing to pay a good rate on these savings deals. Yorkshire and Clydesdale banks will reward savers with just 0.7 pc a year.

the Help-to-Buy isa will pay a 25 pc bonus — funded by the Government — when the savings are used as a deposit on a first home. all interest, and the bonus, is tax-free.

You can save up to £200 a month and kick- start your account with a £1,000 lump sum.

You must add this in the same calendar month that you open the account. So if you have savings already, transfer up to £1,000 into your Help-to-Buy isa to turn it into £1,250.

the bonus is paid when you put down the deposit on your first home costing up to £450,000 in London or £250,000 elsewhere in the UK.

So which is the best account for you or your children?

it depends on whether you have already opened an ordinary cash isa this tax year — which started on april 6 — and if you can afford to save more than £200 a month.

Halifax is the top deal if you haven’t opened one this tax year, and £200 a month is the most you plan to save. it’s also the best even if you have opened a cash isa, but have saved less than £1,200 (the lump sum plus your first month’s saving), including interest.

if you’ve already opened an isa, look at Nationwide or NatWest, which pay 2 pc. this is because of complicated rules that say you can only put new money into one cash isa in the current tax year.

So if you’ve already opened one, you wouldn’t normally be able to open a Help-to-Buy isa.

Nationwide and NatWest are two of the few organisations to have anticipated that this may pose a problem for some people, so they have designed their isas in an unusual way.

they will allow you to transfer your savings from another isa into their accounts.

the most you can pay into a Help-to-Buy isa is £2,400 a year with regular savings.

So, if you have extra isa savings, Nationwide will let you put this in a second isa account attached to your Help-to-Buy deal — the instant isa Saver, paying 1.4 pc, one of the top rates.

it is essentially like one giant isa shopping bag, in which you can save £15,240. as far as the taxman is concerned, this is all one isa and you can still enjoy tax-free savings. Nationwide also offers cashback of up to £1,750 if you use one of its mortgages when you do come to buy.

the property you buy must be your only home and you can’t rent it out — there are exceptions for the armed Forces — or use it as a holiday home.

and don’t expect huge amounts of interest on top of the bonus.

You’ll see £52 interest over 12 months if you save £200 a month at 4 pc — plus another £40 on the £1,000 lump sum. at 2 pc, interest is £26 on £200 a month and £20 on your £1,000.