First-time buyers should take advantage of the Help to Buy ISA before the scheme closes to new investors on 30 November, Moneyfacts has argued.
An analysis of Halifax and YouGov data showed two-thirds (64%) of non-homeowners felt that raising a deposit remains a challenge, despite government initiatives such as the Help to Buy ISA and Lifetime ISA.
Rachel Springall, finance expert at Moneyfacts, said: “Homeownership may still feel out of reach for many consumers, despite a healthy savings habit, which is why any boost to their deposit would be a welcome addition.
“Savers can get a max boost of £3,000 with a Help to Buy ISA and up to £1,000 a year with a Lifetime ISA, and recent research suggests they may well need this extra cash more than they may know.
“Indeed, with the average deposit for those buying their first home hitting £41,099, this represents under a fifth of the average house price in the UK of £224,709.”
A decade ago first-time buyers had a much smaller deposit (£27,059) which made up 20% of the average house price (£138,413).
Once the Help to Buy ISA scheme closes savers would need to turn to the Lifetime ISA to get a 25% government bonus on their deposit.
Should consumers find that they are not eligible for the bonus, they will then face penalties for withdrawing their cash.
Savers can earn more interest with a Help to Buy ISA with the average being 2.41% based on the top 10 best rates, compared to 1.20% on average for a cash Lifetime ISA.
Springall added: “Unlike Help to Buy ISAs, a Lifetime ISA could penalise savers for withdrawing their cash as it only allows access for buying a home, or once they turn 60 or become terminally ill.
“However, savers who are adamant that they will be using a Lifetime ISA may not find much choice.
“Still, someone without any financial support from their family or a partner to buy a home with may feel like homeownership is unlikely to ever happen and could feel as though they will be renting for life.
“Hopefully, this will not be the future for everyone who does desire their own home, but to combat this outlook, taking advantage of any government schemes to help them onto the property ladder is wise.”