• Average house prices are currently estimated to exceed the Help to Buy ISA limit in 38% of UK local authorities
• Average prices are expected to exceed the Help to Buy ISA and LISA limit in 4 out of 5 London boroughs by 2028
• 2024 is set to be the best year to purchase a property using a Help to Buy ISA for the next 5 years

06 February, 2024, LONDON –

Well over half (58%) of local authorities in the UK could have an average house price above the Help to Buy ISA limit by 2028, according to new analysis from personal finance comparison site finder.com.

Help to Buy ISAs are a government scheme that allows people to save up to £200 a month, with the government adding a 25% bonus on savings up to the limit of £12,000 if you use the savings to buy a house. It can be used to purchase property up to £250,000 or up to £450,000 in London.

Finder research analysed the average house price for first-time buyers in different areas of the UK, and forecast the growth of these prices between now and 2028 based on market predictions from Savills. This data was used to reveal where first-time buyers may be unable to use their Help to Buy ISAs to purchase the average property.

The results highlight the problem of the help to buy limit not increasing alongside house prices. With property values set to decrease in 2024 off the back of rising inflation and interest rates, this year is set to be the best year to purchase a property using a Help to Buy ISA for the next 5 years, despite the average house prices in 132 of 348 (38%) local authorities being above the current limit.

With house prices creeping back up next year, it’s predicted that the average cost of first-time buyer properties will exceed the Help to Buy ISA limit in 149 of 348 local authorities (43%) in 2025. In 2026, this figure is due to rise again to 164 (47%) and in 2027 this will increase to 182, which is more than half of all local authorities in the UK (52%).

By 2028, it’s expected that average house prices will be above the help to buy threshold in an enormous 202 of 348 local authorities (58%).

In an attempt to offset this problem, the government now allows individuals to transfer the funds in their Help to Buy ISAs into a Lifetime ISA (LISA) account free of charge. The LISA also offers a 25% bonus from the government but the property price limit is much higher at £450,000, but individuals can only transfer up to £4,000 a year into these accounts. This poses a problem, as anyone with a Help to Buy ISA account will have to drip feed their savings into their LISA account over a period of years, depending on how much they have saved. In the meantime, property prices could continue to rise, pricing them out of more UK areas.

4 in 5 London boroughs set to be priced out of the Help to Buy ISA and LISA bonus by 2028

In London, both the Help to Buy ISA and the LISA limits sit at £450,000, with the government failing to offer any additional budget on the LISA allowance to compensate for the far higher prices in the capital.

Currently, the extremely high prices for first-time buyers in London mean the ISA bonuses are estimated to be unavailable in 50% of London boroughs. This is expected to increase to 53% in 2025 and 56% in 2026. The number then jumps significantly, rising to 66% of London boroughs in 2027.

By 2028, only 6 out of the 32 London boroughs might have an average house price for first-time buyers that is below the threshold for both the Help to Buy ISA and LISA allowance. This equates to 81% of boroughs in London being priced out of these benefits, and at risk of losing their bonus if their money is saved in a Help to Buy ISA, and at risk of actually losing money if they are saving for a house using a LISA.

The locations where the bonus is set to still be available on the average house price includes, Barking and Dagenham, Bexley, Croydon, Havering, Hillingdon and Sutton.

This means that if you currently own a Help to Buy ISA or LISA and plan to purchase a property in London within the next 5 years, now might be the best time to make your purchase if you want to benefit from the bonus.

To see the research in full visit: https://www.finder.com/uk/house-price-predictions

Commenting on the findings, Kate Steere, editor and housing expert at finder.com said:

“The findings of this research really emphasise the need for Help to Buy ISA limits to increase in line with house prices. What was originally a scheme created to help first time buyers get on the property ladder is quickly becoming a redundant initiative that won’t function as intended in the current market.

The deadline to open a Help to Buy ISA account closed in 2019, but existing users can pay into their account until November 2029 and claim the government bonus until December 2030. Unfortunately, it’s likely that house prices will continue to be driven up over the threshold in coming years due to market factors such as a shortage of supply. This is going to make it increasingly hard for individuals to use their Help to Buy ISA to purchase a property. Many will have to sacrifice their government contribution if they want to purchase a house in their area of choice over the coming years, and this will be a huge shame for these savvy savers.”

Methodology

Finder used the latest ONS data to find the average house prices for first time buyers broken down by local authority in 2023.

Property market forecasts produced by Savills were then used to predict the average house price for first time buyers across every local authority in the UK between now and 2028.