In today’s Budget 2015 speech Chancellor George Osborne announced the government plans to launch the new Help to Buy ISA, a savings account designed for first-time buyers and promising a boost from the state.
First-time buyers who decide to use the scheme to save up for a deposit will receive a government bonus, corresponding to 25 per cent of the amount saved.
The maximum monthly amount savers can put in their Help to Buy: ISA is £200. The government will add £50 to that. The maximum government contribution will be £3,000 on savings of £12,000.
This renewed attempt from the government to help more people in the UK to get on the property ladder has been welcomed by lenders associations and by experts across the mortgage industry. There are also critics of the new government initiative who say the proposal is good but all details should be considered before getting overly excited.
Comments
Richard Sexton, director of e.surv chartered surveyors, says:
“George Osborne’s Help to Buy ISA announcement will electrify the first-time buyer segment of the market. Autumn’s stamp duty shake-up created a stimulus for the housing market, and today’s revelation should turn up the wattage even further, spurring lower-end activity. If – that is – there are enough houses for first-timers to buy.
“We have been waiting for consumer confidence to return, and this Budget bolt out of the blue could be exactly what is needed. The top-up system will provide a route around the problem of saving for a deposit while interest rates are low. And banks are primed, ready and willing to lend to worthy borrowers at higher LTVs. Meanwhile, over the last year, the lending landscape has been overhauled with new regulation, meaning even though first-timers are being given a massive boost, there will be no risk to the sustainability of the recovery. This is an attempt to remove the barriers created for first-timers in the recession, rather than an attempt to win younger votes.”
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Andy Gray, managing director of mortgages for Barclays says:
“We are really pleased to see another great initiative designed to help individuals buy their own home. Making the first rung of the property ladder more accessible is a key aim of our Family Springboard Mortgage. Family members can help each other on, or up, the property ladder by providing a 10 per cent security deposit which is held in a ‘Helpful Start’ savings account. The homebuyer is then able to purchase a property with a deposit of at least 5 per cent. After three years, the family member gets their money back with interest, currently paying 2 per cent annually, provided that repayments are kept up to date on the mortgage.”
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Jayne-Anne Gadhia, Chief Executive of Virgin Money says:
“I am delighted to see the positive changes that the Chancellor has announced today with respect to ISA’s.
“Giving customers the flexibility to both pay in and withdraw cash during the year will mean that for many consumers, they will no longer need any other kind of savings account.
“And with the Help-to-Buy ISA, the Government is creating the opportunity to support a new generation of first-time buyers, who are so critical to an effective and well-functioning housing market.
“As a major ISA provider, we look forward to introducing great-value new ISA products that will deliver real benefits to customers, both old and new, as a result of these positive changes.”
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Nick Kennett, Director of Financial Services at Post Office Money said:
“Today’s Budget announcement from the Government is extremely welcome news for the UK’s younger savers and prospective first-time buyers. The creation of a new Help-to-Buy ISA will provide a huge boost for those hoping to get on to the property ladder and save more effectively.
“Taking those first steps into the housing market can often seem daunting and something of an uphill struggle, but this incentive to save – and help from the Government – will make a big difference to younger people around the UK. Anything that encourages a savings habit should be applauded and we look forward to seeing full details emerge over the coming months.
“This is in addition to the launch of a fully flexible ISA which will allow savers to put money in and take it out throughout the financial year without losing their tax free allowance. Our own research showed that 2015 is the year the UK plans to take control of its personal finances, with nearly a fifth (18 per cent) planning on moving or buying their first home this year, and nearly half (45 per cent) expecting to save more.*”
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Adrian Gill, director of Your Move and Reeds Rains estate agents, says:
“Help to Buy is the Chancellor’s trump card yet again – and this significant new ISA scheme will help thousands aspiring homeowners accumulate what they need to jump onto the property ladder. First-time buyers have been dealt a cruel hand in terms of affordability lately – interest rates on savings are low, house prices have largely been on the up for the past six years, and – until recently – earnings haven’t followed suit. This shortcut to saving for a deposit will bring home buying within range for many more, and consumer confidence will certainly shoot through the bottom rungs of the market.
“But today’s announcement tiptoes around the elephant in the room. It’s all well and good getting first-time buyer finances in shape, but it will amount to hollow words if there are no properties available for them to buy, and if competition continues to push house prices higher and higher. Helping homeowners requires both sides of the conundrum to be tackled. The Chancellor has certainly done a good job of boosting demand – but now more needs to be done to sort out supply.”
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Lucian Cook, Savills UK head of residential research says:
“The Help to Buy ISA is a further attempt to keep alive the aspiration of home ownership and help first time buyers overcome the deposit constraints that have been the biggest barrier faced since the credit crunch.
“While it will be welcomed by prospective first time buyers, limiting the ISA to a £12,000 savings plan with a £3,000 government contribution should prevent a surge in house prices. It is more likely to help get buyers over the deposit hurdle in the lower value, lower growth markets of the Midlands and the North than say London and the South East, where significant constraints remain.
“It is also likely to be welcomed by parents and grandparents by making first time buyers less dependent on the bank of Mum and Dad and more inclined to contribute some top up savings when children come looking for assistance to get on the housing ladder.
“However, those first time buyers who are keen to lock into low interest rates and who have access to parental support are unlikely to commit to what is effectively a five year savings plan.”
| Average FTB Deposit | Average FTB Income | Deposit as a % of income | Max £15k ISA as a % of current deposit | Max £3k Government Contribution as a % of deposit | |
| Northern Ireland |
£14,567 |
£27,900 |
52% |
103% |
21% |
| Northern SSR |
£16,359 |
£31,102 |
53% |
92% |
18% |
| Yorkshire and Humberside SSR |
£17,470 |
£31,468 |
56% |
86% |
17% |
| Wales |
£17,646 |
£31,144 |
57% |
85% |
17% |
| North West SSR |
£18,000 |
£32,124 |
56% |
83% |
17% |
| East Midlands SSR |
£18,721 |
£32,459 |
58% |
80% |
16% |
| West Midlands SSR |
£19,810 |
£32,963 |
60% |
76% |
15% |
| Scotland |
£20,075 |
£32,607 |
62% |
75% |
15% |
| East Anglia SSR |
£26,204 |
£36,038 |
73% |
57% |
11% |
| South West SSR |
£30,022 |
£36,860 |
81% |
50% |
10% |
| South East SSR |
£32,057 |
£43,973 |
73% |
47% |
9% |
| Greater London SSR |
£69,630 |
£55,539 |
125% |
22% |
4% |
Source: Savills Research/CML
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Matt Hutchinson, director flat and house share website SpareRoom.co.uk, says:
“At first glance, a handout of up to £3,000 from the Government for hopeful first time buyers looks too good to be true.
“But to get your maximum £3,000 bonus, with maximum monthly payments of just £200, you’ll be saving for four and a half long years. By which time, prices will likely have risen again and a £15k deposit won’t be enough.
“And, as for the bigger picture, this ISA will merely stoke demand without addressing the UK’s chronic supply problem.
“Unless house prices and rents become more affordable, we stand no chance of reaching the real housing goal, which is providing a range of affordable, secure tenures for all, so people can choose the one that best suits their needs.
“What we need is a realistic building programme, combined with far better use of existing housing stock. There isn’t a great deal in this Budget to calm the fears of renters worried about their housing costs.
“Once again the Government is making a big mistake in its tunnel vision focus on homeownership, offering sub par pledges that help a select few, rather than tackling the acute crisis of supply and affordability the UK housing market faces.”
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Read more details about the new addition to the Help to Buy scheme in our story, giving the details about rules and requirements for opening and saving into a Help to Buy ISA.
Full details about the new scheme are available online in the HM Treasury’s outline of the scheme.
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