Help to Buy Isa rates flop

Two thirds of prospective homebuyers are likely to take advantage of the new Help to Buy Isa yet rates so far have been disappointing.

Halifax offers by far the most competitive rate of 4% while some of its rivals offer as little as 0.5%.

Newcastle Building Society is paying the lowest rate of just 0.5%, although this increases to 1.50% for those who save every month and don’t make any withdrawals.

Yorkshire and Clydesdale banks pay just 0.70% and Santander pays 1.50%, rising to 2% per cent for customers with its 123 World and Select accounts.

Aldermore, Bank of Scotland, HSBC, Lloyds Bank and Nationwide all pay just 2%.

Anna Bowes, director at SavingsChampion.co.uk, said the new rates are "underwhelming".

"Halifax could well clean up with its market-leading 4%, double what the majority are offering."

Bowes was also disappointed that only a dozen banks and building societies have so far bothered to launch a Help to Buy Isa. "It will be extremely disappointing if many more don't get on board, we need the competition to drive rates in the right direction."

Research from MoneySuperMarket shows that 63% of prospective homeowners plan to take advantage of these new tax-free accounts to help get them on the housing ladder. 

More than eight in 10 of those who plan to take advantage of the Help to Buy Isas think that it will help them get on the ladder earlier than planned.