Roughly 45,000 sales have been stalled as first-time buyers were unable to use their Help to Buy Isa for a deposit, according to OneFamily.
The Help to Buy Isa savings cannot be used for a property deposit because funds are released after completion. OneFamily surveyed 789 homeowners and found of the first-time buyers, 23 per cent said that their purchase was delayed because of this.
As more than 196,000 savers have now made purchases aided by the government’s HTB scheme, OneFamily calculates there will have been 45,000 sales stalled.
Of that figure, 15 per cent said they had expected to be able to use the Isa savings for the deposit and the sale was delayed when this turned out not to be the case. OneFamily says this has left many borrowing from friends and family to bridge the deposit gap.
The bulk of the delays stemmed from complications such as buyers having to negotiate with their bank to get their bonus release.
Of 250 people OneFamily surveyed who are considering buying their first home in the next three years, 69 per cent believe they can put the cash saved in a HTB Isa towards the deposit. This, the group says, could mean around 700,000 savers finding they have a funding shortfall of up to £3,000 for their deposit.
OneFamily is urging the government to better promote the Lifetime Isa, introduced as the long-term replacement to HTB in 2017, because it argues it is simpler to understand and does allow buyers to use the Isa for a deposit.
OneFamily managing director of Lifetime Isas, Nici Audhlam-Gardiner, says HTB is not fit for purpose.
“We support the closure of the HTB Isa next year as it is not fit for purpose and is actually delaying property sales, however our research shows that the majority (55 per cent) of first-time buyers remain unaware of the Lifetime Isa.
“We are urging the government to reiterate its closure plans and further support the Lifetime Isa and help the thousands of people who are desperate to get on the ladder.”
She urges prospective buyers to look to the Lifetime Isa for saving: “If you are hoping to buy your first property then you need to avoid the HTB Isa if you are planning to use the bonus towards your initial deposit.
“The Lifetime Isa, introduced last year, is far better for first-time buyers as not only do savers make more in government bonuses, they can actually use it towards the deposit,” adds Audhlam-Gardiner.