Leading lenders Halifax and Nationwide have announced how much interest they will be paying on their Help to Buy Isas.

The new scheme kicks off on Tuesday 1 December and Halifax has taken a clear lead by paying annual interest of 4%.

That is double the 2% that rival Nationwide will offer its scheme.

Halifax says that savers who depositing the maximum amount over five years could turn £13,000 into over £17,500 in its Isa.

Nationwide’s rate is lower but it is offering also cashback of up to £1,750 for first-time buyers accessing its Save to Buy mortgage range.

The Help to Buy Isa is open to first-time buyers over 16.

They can start by depositing £1,000 in an account, then pay further monthly deposits of a maximum £200.

The Government will add 25% to the closing balance of the account, with a minimum payout of £400 and a maximum of £3,000.

The bonus is paid when the account is closed, as part of the conveyancing process.

New research from Halifax suggests that almost half of prospective first-time buyers are set to open a Help to Buy Isa.

Head of Halifax Savings Giles Martin said: “Opening this account, with a 4% interest rate and a 25% Government bonus, will make buyers’ savings work much harder.”

Nationwide is paying a lower rate of 2% but says it will give first-time buyers access to discounted 5% deposit mortgages

It will also offer cashbacks of up to £1,750 on its Save to Buy mortgage range as well as Help to Buy Isa bonus.

Nationwide claims to be the only large provider that is offering more than one cash Isa product in its wrapper.

Chris Rhodes, Nationwide’s retail director, said: “Nationwide already supports other Help to Buy schemes and offers around of a third of all lending for the Help to Buy Equity Loan scheme.”

Nationwide will be contacting all existing Save to Buy customers to notify them that they could be eligible to open a Help to Buy Isa alongside their Save to Buy savings account. The Save to Buy savings accounts and Isa will be removed from sale to new customers.