Use of Help to Buy ISA for property purchases drops by half since 2021

The popularity of the Help to Buy ISA has significantly dwindled, with the lowest number of properties purchased using the scheme recorded in 2023.

Only 45,016 properties were bought with the assistance of a Help to Buy ISA last year, less than half the number in 2021, which saw 93,922 properties purchased.

This decrease continues with only 10,985 properties bought in the last quarter of 2023, a 9% drop from the previous quarter.

Introduced in December 2015 and closed to new entrants in November 2019, the Help to Buy ISA has contributed to the purchase of 592,105 properties overall.

Despite the scheme’s success over the years, its effectiveness is waning as it approaches its end, with bonuses claimable until 2030.

The average property price bought through the Help to Buy ISA is £177,877, significantly lower than the average first-time buyer property price of £237,655 and the general average property price of £284,691.

Sarah Coles, head of personal finance at Hargreaves Lansdown, commented on the decline: “The Help to Buy ISA had a horrible 2023. As the property market slowed to a trudge, the Help to Buy ISA lagged behind, dragging its feet and complaining. There were half as many purchases using the scheme as there were two years ago.”

Coles also highlighted the limitations of the scheme, including the £250,000 property value cap outside London and the £3,000 government bonus cap, which she argues are increasingly inadequate as property prices rise.

She suggests that those concerned about these limits consider switching to a Lifetime ISA, which offers a higher property value cap of £450,000 and allows for larger annual contributions.

“The gradual slide of the Help to Buy ISA also holds useful lessons for the LISA. The limits are more generous here, but unless the government rethinks how they’re set, as house prices rise in the coming years, it risks the same fate,” Coles added, warning of potential future challenges for the Lifetime ISA unless adjustments are made.