Business

Deals unveiled for new Help to Buy Isa

Help to Buy Image copyright Getty Images

Interest of up to 4% will be paid on new Help to Buy Isas - accounts aimed at helping potential property buyers save for a deposit.

Banks and building societies are unveiling their deals as part of the government-backed scheme which begins on Tuesday.

As with a traditional cash Isa, interest will be free of both income and capital gains tax.

The government will also top-up savings in these accounts.

When savers take money out to buy a house or flat, the government will add 25% to whatever is in the account, up to a maximum of £3,000.

Among those to have unveiled details of their new Help to Buy Isa products are the Halifax, part of Lloyds Banking Group, which will offer an interest rate of 4%. The Nationwide will pay 2% interest and offer access to other perks, while the NatWest will offer 2% but vows not to give bonus rates for new customers which quickly disappear.

The rates are variable so may change over time.

Charlotte Nelson, of financial information service Moneyfacts, said: "It looks like the competition is now on to entice these new savers and to be seen as the first-time buyers' choice."

Plans for a Help to Buy Isa scheme for potential first-time buyers were announced in Chancellor George Osborne's Budget in March. Rising house prices and rents have meant it can take longer for these young adults to save the deposit required to secure a mortgage.

Campbell Robb, chief executive of housing charity Shelter, said that a "key test" for the measures would be whether they would work for people on average and lower incomes.

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