Flawed Isa thwarts 45,000 first-time home buyers

TENS of thousands of first-time home buyers have had their purchases delayed because of a flaw in the Help to Buy Isa, research has found.

In 2016, the savings accounts were described as a “scandal” when this newspaper disclosed that first-time buyers would not be able to use the money saved for an initial deposit on their new home.

A flaw in the scheme means a 25 per cent government “bonus” on savings is not paid out until the sale has been completed, leaving buyers to find the deposit money elsewhere, for example by borrowing from parents.

Since 2015, when the accounts were first launched, an estimated 45,000 property purchases have been delayed as a result of this problem, according to Onefamily, a financial services provider. The research is the first time the extent of the scale of the long-standing problem have been quantified.

The Treasury was made aware of the flaw by this newspaper in 2016 but refused to fix it, admitting that the clause was included to stop people benefiting from the bonus without actually buying a house.

Onefamily surveyed 800 homeowners who had bought using the Help to Buy Isa and found 15 per cent had not been able to use the money in the account in the way they expected. This has delayed nearly a quarter of purchases, it said, equivalent to around 45,000 purchases in total – as first-time buyers realised they had a major hole in their finances.

The Help to Buy accounts let customers save up to £200 a month, to which the Government adds £50, up to a final total of £15,000. Nici Audhlamgardiner, managing director of Lifetime Isas at Onefamily, said: “If you are hoping to buy your first property, then you need to avoid the Help to Buy Isas if you are planning to use it to pay the initial deposit.

“We support the closure of the Isa next year as it is not fit for purpose and is actually delaying property sales.”

A Treasury spokesman said: “The bonus is paid between exchange and completion once it is certain the transaction is going ahead. This contributes to your overall deposit and therefore increases savings for your first home.”