August 21st 2016 2:48 pm

Written by Ray Arman

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Help to Buy ISA Savers Blocked From Using Bonus Funds For House Deposit

500,000 potential ISA account holders unaware of small print preventing use of the bonus against the house deposit.

Those struggling to claw together a deposit to get on to the housing ladder were buoyed by the Government introduced Help to Buy ISA where for every £1 invested the Government 'topped up' the fund with 25 pence - up to a maximum of £200 per month invested leading to a £50 top-up.

Savers would hope that by maximising the ISA's benefits they would achieve a total bonus top-up of £3,000 on their contributions of £12,000.

Unfortunately in the small print of the scheme, the bonus is only paid out once the property sale has been completed - meaning that the buyer would still need to find the whole deposit themselves - up to £3,000 therefore could be missing.

The Government put the clause in to prevent fraudulent top-ups by non-home purchasers. The scheme has now been used by only 1,500 home buyers who likely have been mis-sold on the basis they could use it to save for a house deposit.

The official line from the Treasury on the matter now is that the scheme was not meant to directly support house deposits, but instead provide a capital lump sum upon purchase completion that can go directly into reducing the mortgage amount.

The situation causes further disruption as the size of the deposit is taken into account when securing a mortgage deal and offer - the higher the deposit the lower the rate. Buyers could be caught out when exchanging contracts as when they are asked to draw-down the deposit fund they will only at that stage be told that 25 percent is missing.

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