Help to Buy ISA: a round-up of rates

Savers can deposit up to £1,200 within the first calendar month of funding the account, and then up to £200 monthly thereafter. Once the account has a balance of £1,600 it qualifies for a government bonus of 25% up to £3,000 per person.

A range of providers will be offering Help to Buy ISAs, with varying interest rates and linked benefits.

Halifax is currently offering the highest interest rate of 4%, but its account doesn't allow savers to split their £15,240 allowance with another cash ISA.

Virgin are offering a rate of 3% alongside a new Saving to Buy account, offering interest of 1.30%. The account helps savers to maximise their tax-free allowance as they can set up a regular transfer from their Saving to Buy account into their Help to Buy ISA.

Aldermore, Nationwide and Natwest are all offering an interest rate of 2% and are ‘ISA wrapper’ providers, meaning customers who already have a cash ISA (providing their maximum annual contribution does not exceed £15,240); can open a Help to Buy ISA too.

Santander's Help to Buy ISA pays an interest rate of 2.00% to existing Santander 1|2|3 World and Select customers, and 1.50% to all other customers.

Lloyds Bank and HSBC are also offering a rate of 2%.

The Newcastle's Help to Buy ISA comes with a rate of up to 1.50% and its Custom ISA facility allows savers to open a Help to Buy ISA alongside another ISA from the Newcastle’s range, allowing them to utilise their full ISA allowance. In addition, NBS has also launched the ‘Newcastle First Home ISA’ with a rate of up to 1.15%.

Jody Baker, Head of Money at comparethemarket.com, commented:

“The Help to Buy ISA introduced today for first time buyers will offer a welcome savings boost, free of both income and capital gain tax, for those trying to get on the housing ladder. That said, with house prices continuing to climb rapidly, the modest threshold offered -  £15,000 in total per person, with the Government’s 25% bonus – will mean a large number of people  will need to house their savings elsewhere also. With savings and Cash ISAs offering very little in the way of interest, savers will need to keep searching the market for the best offers.

“A number of providers have come out with some competitive Help to Buy products including the Halifax which is paying 4%, double that of the 2% being offered by both Nationwide, HSBC and NatWest. You are only allowed one Help to Buy ISA per tax year but you can transfer between providers, so each year you should be comparing the interest rates on these products so you achieve your savings goals and purchase your first home as soon as you are able.”