Halifax slashes rate on Help to Buy Isa – again
Halifax, one of two providers previously offering market leading Help to Buy Isa rates has slashed the interest it’ll pay new customers from 2.5% to 2%.
This is the second time Halifax has cut the rate on its Help to Buy Isa since the account was launched with a headline-grabbing 4% rate in December 2015.
However, Halifax’s rate cut does not affect existing customers, who will continue to get 4% or 2.5%, depending on when they signed up for the account.
Lloyds Bank has also cut its rate for new customers, from 2% to 1.5%. Again, existing customers are unaffected.
The rate cut means Virgin Money is now the market leading Help to Buy Isa provider open to everyone, offering 2.5% interest throughout the UK. This is followed by Barclays at 2.27%.
Some building societies do however, offer as much as 4% to people in their local area. Savers in Cumbria can get 4% with the Penrith Building Society, while the Cumberland Building Society offers 3%. Tipton and Coseley Building Society, which serves people in the West Midlands, pays 3%.
All Help to Buy Isas will give savers a 25% bonus when they finally buy their property, helping them to save their required mortgage deposit earlier.
Reports over the last week have highlighted that the Help to Buy Isa bonus can’t be used for a down payment on the property when you exchange contracts, but for most buyers this shouldn’t be an issue as it can still be used to pay for the mortgage deposit.
A spokesperson for Lloyds Banking Group says: “We regularly review our savings range and make changes in line with the market and our competitors. These changes will not affect existing customers.”
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.