In the six and a half years since launch Help to Buy ISAs have been used to buy 514,868 homes, according to the latest HM Treasury data.
However, with prices now significantly higher than when the ISAs were launched calls have been made for a review of the scheme.
The Help to Buy: ISA scheme was launched on 1st December 2015 with accounts available through banks, building societies and credit unions.
The scheme enables people saving for their first home to receive a 25% boost to their savings from the Government when they buy a property of £250,000 or less (with a higher price limit of £450,000 in London). It closed to new entrants in 2019.
The average value of a property bought through the scheme is £176,456, compared to an average first-time buyer property price of £246,776.
Between April and the end of June, 8,018 properties were bought with a Help to Buy equity loan – taking the total to 369,104.
However, Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, has called for a review of the rules around the scheme.
She said: “Help to buy ISA rules are making it harder for first-time buyers to snap up their first home, because only those buying bargain properties can take advantage of the Government bonus.
“The allowance outside London hasn’t changed in the seven years since the scheme started, while prices are up by more than 50% – and it’s not the only allowance that’s not fit for purpose.
“The average price of a property bought through the scheme is far lower than the average for first-time buyers overall: people have either had to settle for a cheaper home or forgo their bonus.
“Meanwhile, there are now only three regions of the UK where you could buy the average property for less than the regional cap of £250,000, and in London, the average price is now £103,000 higher than the London cap of £450,000.
The Government needs to reconsider the limits on the Help to Buy LISA, and the Lifetime ISA. They should be linked to house price inflation, so buyers have the security of knowing that however long they save for, and however house prices move in the interim, they will be protected.
“The Government also needs to reconsider the fact that LISA savers have to pay a 25% penalty if they buy a property worth more than £450,000.  This doesn’t just remove the Government bonus, but a chunk of their own savings too.
“It’s ludicrous that people should be penalised for trying to do the right thing and being hit by forces out of their control.:
