'Help To Buy' ISA: Your Questions Answered

The Chancellor has unveiled several measures to benefit savers in this year's Budget, as low interest rates continue to bring disappointing returns on money stashed away.

One new policy is the "Help to Buy" ISA which is an extension on a current scheme designed to assist first-time buyers as they save up for the deposit on a property.

Here, we answer questions about how the ISA will work, along with the restrictions that are going to be placed on each account.

:: What is the maximum that a first-time buyer can save per month?

With a "Help to Buy" ISA, an aspiring homeowner can save up to £200 a month.

The Government will then contribute 25% on top of the money deposited, meaning there is a maximum bonus of £50 available for each calendar month.

:: Can an initial deposit be made?

Yes. A first-time buyer will be allowed to open the ISA with £1,000 - helping them to immediately secure a Government bonus of £250.

:: What is the total value of the Government's support over the course of the ISA?

The maximum a first-time buyer will be able to save with this ISA is £12,000.

When combined with the Government bonus of 25%, this rises to £15,000. These accounts also accrue interest like any other ISA, meaning the total amount available could be considerably more.

:: Can a "Help to Buy" ISA be used for all properties?

No. A first-time buyer cannot use this ISA to purchase a house that they plan to rent out.

Also, the tax-free bonus can only be used for properties worth less than £450,000 in London, or £250,000 elsewhere in the UK.

The cash from the Government is released once the purchase of the home is finalised.

:: Do first-time buyers have to save the maximum £12,000 to benefit?

No - but they must save at least £1,600 to be eligible under the scheme.

This means they will get at least £400 in financial support from the Government.

Given the restrictions placed on monthly deposits, a first-time buyer would need to be in the scheme for at least four months.

:: Can first-time buyers still use another ISA?

The "Help to Buy" ISA still falls under the current rules - meaning an account holder cannot have more than one cash ISA per year.

However, if two people are planning to buy a home together, they can have one "Help to Buy" ISA each - meaning they could receive a total of £6,000 in bonuses from the Government.

Additionally, a first-time buyer will still be able to save £1,000 tax-free in a normal savings account under new personal allowance rules.

:: Is there a limit on how long the account can remain open for?

No. First-time buyers can have as long as they need to save up for their deposit.

:: When are the "Help to Buy" ISAs going to be launched?

Although the ISAs are only going to be available from this autumn, first-time buyers can begin saving for the £1,000 initial deposit now.

That way, they will benefit from the full Government bonus when banks begin to offer the accounts later this year.

:: Is the "Help to Buy" ISA a temporary policy?

Yes. First-time buyers have four years to open an account.

:: Will the policy be enough to help first-time buyers?

Although charities and estate agents have welcomed the policy, some experts have warned rising house prices are the biggest challenge facing aspiring homeowners and young people will not be able to save fast enough to keep up.

There are also concerns the scheme could actually force up property prices further.