Decline in Help to Buy ISA property purchases in 2023

In 2023, the Help to Buy ISA scheme has seen a significant drop in its use for buying properties, with only 12,065 homes purchased in the three months to September.

This year is on track to have the lowest number of properties bought using the scheme since its launch in December 2015.

Despite closing to new entrants in November 2019, the scheme has assisted in purchasing 581,167 properties in total, with an average property price through the ISA of £177,752, which is below the average first-time buyer property price of £242,000 and the general average property price of £291,000.

Sarah Coles, head of personal finance at Hargreaves Lansdown, commented on the scheme’s performance, stating: “2023 wasn’t a golden year for property in general, but it was a particularly lacklustre one for the Help to Buy ISA.” She attributed this downturn not only to the slow market conditions, exacerbated by high mortgage rates in August, but also to the scheme’s diminishing appeal due to its closure to new entrants nearly four years ago and the low interest rates offered by the remaining Help to Buy ISAs.

Coles highlighted the scheme’s restrictive property value cap of £250,000 outside London as a significant barrier, especially as it approaches the average price of first-time buyer properties. She also pointed out the limitations on savings, with monthly contributions capped at £200 after the first month and a government bonus capped at £3,000, making it challenging for savers to accumulate a substantial deposit.

For those concerned about these limitations, Coles suggests considering a transfer to a Lifetime ISA, which has a higher property value cap of £450,000 and allows for higher annual contributions. However, she advises caution due to the transfer restrictions and potential penalties involved.