Help to buy Isa schemes unveiled - get 4% interest
First time buyers will be pleasantly surprised by the rates available on Help to Buy Isas, as the first wave of products announced today included a market-beating 4% interest rate from the Halifax.
Someone saving the maximum amount under the Help to Buy Isa scheme with Halifax would earn £1,525 in interest over five years, according to their calculations.
Giles Martin, head of savings at Halifax, said: “many see the new Help to Buy ISA as a genuine solution [to get onto the property ladder], with half of prospective first-time buyers intending to open an account.
“For those looking for an incentive to save regularly, opening this account, with a 4% interest rate from Halifax and a 25% Government bonus, will make what they do save work much harder for them.”
Bank of Scotland, Lloyds and Nationwide also unveiled accounts paying 2% interest today, joining NatWest who confirmed they will pay 2% interest to Help to Buy Isa customers.
In the run up to launch, expert commentators had voiced concerns that Help to Buy Isa products would pay low rates of interest, as Cash Isas typically earn less interest than taxable savings.
So far these fears appear unfounded, but Santander, HSBC and Virgin Money are yet to show their hands.
Newcastle Building Society is also yet to announce its rates, but it has confirmed arrangements that let customers hold a Help to Buy Isa alongside another cash Isa account.
Ben Smith, product development manager at Newcastle Building Society said: “We have an innovative facility called CustomISA that allows savers to take out more than one ISA product in a year providing you stay within your overall ISA allowance, helping savers make maximum use of their full ISA allowance.”
NS&I said it has no plans to launch Hisa products at first, but will continue to monitor the situation.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.