First time buyers were offered up to £3000 to put down as a deposit through a new Help-To-Buy ISA which was unveiled by the chancellor in his budget.
You see slow wage growth, poor returns on savings and higher house prices have made getting on the property ladder tricky for many ordinary folks.
But recently in his final Budget before the general election, Osborne announced a new savings account which meant Britain could finally ‘walk tall again’ after years of austerity.
But how does it work?
For every £200 a saver squirrels away, the government will top this up by an extra £50 up to a maximum of £3,000 or 25% of their savings.
So if the prospective buyer saved £12,000 (the maximum amount) in the Help To Buy ISA the Government would boost this up to £15,000.
The bonus element means its offered to each person, not house, meaning a couple would be able to get up to £6,0000 towards their property purchase along with interest payments.
Who Can qualify?
Any person aged over 16 and who has never owned a home will be allowed to take advantage of this new scheme. The payment will exclude using the funds to purchase a buy to let property.
Is there a cap?
Yes. £450,000 for homes in London and £250,000 elsewhere in the UK.
Minimum contribution
To qualify for the minimum contribution of £400 you will need to save for at least £1600 in the account.
To obtain the maximum benefit, you will need to open an account and deposit £1000 followed by monthly deposits of £200 per month for four and a half years.
That’s not to say you can’t deposit £50 one month, and £200 the next…
When will it help you buy a home?
The scheme will be available for 4 years from autumn this year and you will be allowed to keep the account until you are ready to buy your first property.
The bonus will only be available when you actually come to purchase the property.
Will the scheme work?
By the time prospective buyers take advantage of this new scheme house prices may have been pushed further upwards so will the typically £15,000 deposit be enough?
If prices stay stagnant or don’t get pushed much higher, by the time the buyer exercises their right to use the additional top up (especially in an area where the median deposit is around £25,000) will mean a couple would be able to use £6000 through the scheme.
Is the Help To Buy ISA a good idea?
It encourages prospective buyers to save enough which can alleviate pressures on the rental market or through increasing loan to values.
However on the other-hand, it does nothing to tackle the main issue of under-supplied homes which has driven up house prices.
Where is the ISA available?
Through all the major banks and building societies. Savers will have the benefit of of moving between ISA’s to ensure they are getting the best deal
The Help to Buy ISA will help tackle ‘two of the biggest challenges facing first time buyers – the low interest rates when you build up your savings, and the high deposits required by the banks’, said Osborne.
What do you think?
Is this what is needed to engage the first-time buyer market – particularly as we have seen the current criteria under the MMR (Mortgage Market Review) constraining aspirations for purchases to buy a home?
Is this a perfect seasonal storm?
