Jargon used to describe schemes designed to give new buyers a helping hand appear to be confusing over half of prospective buyers rather than supporting them.
Terms such as ‘Lifetime ISA’, ‘Help to Buy: ISA’ and ‘Help to Buy: Equity loan’ were among the phrases perplexing this group of buyers, according to specialist bank Aldermore’s First Time Buyer index.
And their lack of understanding could mean many were missing out much-needed support to get on the housing ladder.
Cash perks
Indeed, Aldermore said first-time buyers can get up to £12,000 from the Government through the Help to Buy: ISA or £1,000 a year with the Lifetime ISA.
They could also be missing out on the loan available through Help to Buy: Equity and the benefits of shared ownership, which can be strong options for those with smaller deposits.
This lack of awareness meant nine in ten people questioned by Aldermore thought it would be difficult to get on the ladder and two thirds of prospective buyers thought buying a home would be unachievable.
Damian Thompson, director of mortgages at Aldermore, said: “Buying a first home is a challenging process and it is being made harder as future buyers clearly do not feel they are being informed enough about the options open to them.
“Collectively as an industry we need to do a better job with educating prospective buyers to ensure they are knowledgeable of the products and initiatives available so they are not missing out.
“This will help ease the stress and anxiety of what should be an enjoyable and exciting time in their lives.”
Cracking the code – know your first-time buyer incentives
Help to Buy: Equity – the Government lends you up to 20% (40% in London) of the cost of a new-build home. This means you need only a 5% deposit. You then require a mortgage which covers 75% of the cost of the house. The loan is interest-free for the first five years. The scheme is open to all first-time buyers purchasing a new build property and will be available until 2023.
Help to Buy: ISA – This is a savings scheme which, in line with traditional ISAs, pays tax-free interest. It also benefits from a 25% Government bonus – so, for every £200 saved, you receive £50. The maximum bonus entitlement is £3,000. You can open an ISA through a number of building societies and high street banks. However, the scheme is due to end this year so you must have opened your ISA by 30 November, 2019 and have claimed your bonus by December 2030.
Lifetime ISA – Also known as LISA, this is another savings scheme to help first-time buyers. This one is open only to those aged over 18 and below 40 and can also be used as a way to save for retirement. You can deposit up to £4,000 a year and the Government will give you a 25% bonus up to a maximum of £1,000 each year, until you are 50. If you are using the money to pay for your first home you can withdraw the money when you are ready to make the purchase.
Shared ownership – This scheme provides a way for buyers to purchase a proportion of a property (between 25% and 75%) and rent the rest. You can purchase a new-build or an existing home through a housing association. There’s the option to increase your share in the property later on. The scheme is open to first-time buyers aged over 18 who have a household income of less than £80,000 (£90,000 in London).
For more information visit the Government’s Help to Buy website. You can find out more about Lifetime ISAs here.
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