Help to Buy ISAs explained: How the NatWest, HSBC and Barclays saving accounts work
NEW 'Help To Buy' ISA accounts are launching on December 1 and will give first time buyers extra money towards a deposit for their home - here's how the savings scheme works and what you need to know.
Help To Buy Isas give savers extra cash towards a deposit
Help To Buy ISAs give account holders a cash bonus that is equal to a quarter of the amount put in each month, up to £200.
It means that an extra £50 a month - or £600 a year - from the Government is available towards a deposit.
Savers can open the account with a cash lump sum of £1,000, which is also eligible for the 25 per cent bonus, making another £250 extra available.
In total up to £3,000 is available from the Government on a savings pot of £12,000, which would take four and a half years to save through the accounts.
Account holders don't have to save the full amount to get extra cash. But the Government won't pay less than £400 in a final bonus, so savers will have to put at least £1,600 through the account to get any benefit.
The scheme will be available to new account holders for four years, but once you have an ISA you can keep it for as long as you like.
The bonus is paid when the savings are used to buy a first home in London priced up to £450,000 or anywhere else in Britain up to £250,000.
As with other ISAs, interest earned is sheltered from tax.
Who is offering the accounts and the best rates?
NatWest, Aldermore, HSBC, Clydesdale Bank, and Newcastle Building Society are offering accounts from the launch date of December 1.
But only NatWest has revealed its rate, which stands at 2 per cent.
Saving for a deposit is one of the biggest hurdles for first time buyers
Buying a home could be in closer reach with the new accounts
Barclays, Bank of Scotland, Halifax, Lloyds, Nationwide, NatWest, Santander, Ulster North, Virgin Money, Yorkshire Bank have also signed up to release the products in due course.
If you have already opened a cash ISA in this tax year, you will have to wait until April 2016 before you can open a Help To Buy ISA because only one tax-free account can be opened each year.
However, Aldermore has confirmed it wlll allow customers to open a Help To Buy ISA alongside an additional Aldermore ISA product, provided the total sum doesn't breach the ISA saving limit for this year of £15,240.
Savng for a home can be a daunting task, but the Government is launching a new scheme to help