The average UK house price has now soared above the £250,000 Help to Buy ISA limit and would have to stand at £336,000 to have kept up with house price growth.
AJ Bell has said such savers should consider switching to a Lifetime ISA (LISA), which has a higher property limit of £450,000.
However, it warns savers that they must make sure the LISA is right before switching due to the pros and cons of switching from a Help to Buy ISA to a Lifetime ISA
Laura Suter, head of personal finance at AJ Bell, said: “Help to Buy ISAs are closed to new customers, but around 2.5 million people have the accounts and could get a higher bonus and more expensive property by switching to a Lifetime ISA.
“Help to Buy ISA savers risk being priced out of the property market, as UK house prices have soared since the accounts launched and the limit on the ISAs has failed to keep pace.
“Someone using a Help to Buy ISA must buy a property worth up to £250,000 across the UK or £450,000 in London.
“This leaves those buying in expensive areas outside of London out in the cold, as they face being priced out.
“The average UK house price has now soared above the Help to Buy ISA limit. A year ago the average house price was just under the limit, but it has risen £27,000 in the past year and is now £275,000 at the latest figures.
“The limit on the Help to Buy ISA has remained the same since the accounts launched in 2015. If the limit had increased each year in line with average house price growth it would sit at almost £336,000 today.
“Anyone who wants to buy a property worth more than the limit faces not being able to claim the Government bonus on the Help to Buy ISA, meaning they face up to a £3,000 shortfall on their deposit money – the maximum bonus on offer.
“Anyone buying in more expensive areas outside of London, in the south-east for example, or who knows their property price will exceed £250,000 could consider switching to a Lifetime ISA, which has a higher limit of £450,000 regardless of where in the UK you are buying a home.
“However, anyone switching to a Lifetime ISA needs to be mindful of a few rules, to make sure the accounts are right for them.
“The biggest one is that the account needs to be open for a year before you buy a house, so it’s no help if you plan to buy in the next 12 months.
“But with a higher property limit, higher contribution limit and higher potential Government bonus, you could get more free money by moving.”
