In light of the 2015 Budget, David Treharne of Mortgage Advice Bureau discusses the new Help to Buy savings accounts announced by Chancellor George Osborne.
First-time buyers will get £50 for every £200 they save towards a deposit for their first home.
Announced in the budget, first-time buyers are to receive a new ‘Help to Buy ISA’, which will see the government add £50 to every £200 buyers manage to save towards a deposit.
Only available for the next four years and being introduced in the autumn, the new savings account will only be available to consumers who are yet to buy their first home and will have no limit to how long people can use the accounts for.
The account will also be available per person rather than per home, which means that couples looking to buy their first home will receive double the amount.
The accounts will come with no minimum monthly payment, though it should be noted that a maximum of £200 can only be saved in a month. The government has also capped the bonus they will pay in at £3,000.
First-time buyers based in London will be able to use the savings to buy properties worth up £450,000, whilst the rest of the UK will see a ceiling of £250,000.
An example of how the scheme could work was given by the chancellor George Osborne delivering his Budget: “A 10 per cent deposit on the average first home costs £15,000, so if you put in up to £12,000 – we’ll put in up to £3,000 more.
“A 25 per cent top-up is equivalent to saving for a deposit from your pre-tax income – it’s effectively a tax cut for first time buyers. We’ll work with industry so it’s ready for this autumn and we’ll make sure you can start saving for it right now.”
Head of lending at Mortgage Advice Bureau, Brian Murphy, believes that the Help to Buy ISA is a: “crowd-pleasing move and another sign of greater commitment to improving accessibility in the housing market.
“First time buyers will welcome the measure. But in many cases, their next step will be to ask which of the many schemes and incentives on offer is the best suited to their needs?
“Offering the savings bonus on purchases worth up to £250,000 outside London or £450,000 in the capital looks far more sensible than the maximum £600,000 limit that currently applies to house purchases through the Help to Buy equity loan or mortgage guarantee.
“The £600,000 cap has proved unnecessary for the vast majority of homebuyers using either scheme to secure a mortgage. The new ISA is a welcome innovation – but the fact that different rules and timescales exist for the various elements of Help to Buy has the potential to cause confusion, and first-time buyers will want to understand how they work in tandem.
“We are sure to see more pre-election policy ideas to support first time buyers, and politicians must work closely with industry to ensure new measures are as clear and accessible to first time buyers as possible.
“Anyone confronting the array of choices is likely to find that expert advice is essential to make headway and ease their path towards homeownership.”
David Treharne is from Mortgage Advice Bureau – for further information call: 07501 720320 E mail: firstname.lastname@example.org or visit: www.dawsonsproperty.co.uk