Amongst the breadth of George Osborne’s 2015 budget statement came an apparently innovative approach to assisting first time buyers to purchase their first property. The Chancellor disclosed a new savings scheme specifically aimed at aiding new buyers to build a deposit for a purchase, via what he chose to dub the Help to Buy ISA.
Anyone over the age of 16 that have never owned a home can choose to open the ISA. It is aimed solely at residential purchasing, so buy to let property is not an option. The maximum level of savings allowable for an individual is £12,000, with the option open per person, so that couples can double their input. As well as earned interest, the Government guarantee to add a 25% bonus to the fund, effectively providing £3000 per person if the account maximum is utilised.
Certain limits on value for a potential property have been included, with the maximum value in London set at £450,000 and £250,000 in any other part of the UK. In addition, the timescales to use the fund to build a deposit will not be instantaneous. The Chancellor has proposed that the scheme will be open from the autumn, conveniently post-election in May, with a projected timescale of four years. To reach the maximum potential bonus from the Government, at least £200 would need to be contributed per month for five years.
Responses to the scheme have been varied, with opinion split over exactly how much of a boon this proposal will be to the continued growth of the housing and mortgage sector. The view from trade bodies has initially appeared to be positive, with the level of property building still lagging far behind the amount required to provide sufficient housing stock.
A spokesperson for the Home Builders Federation said: “The ISA is a very positive move as it will encourage and assist people to save for a new home - and is something we have long called for. Allowing people to achieve their ambition of home ownership more quickly will assist maintain demand for new build homes and, in turn, allow builders to increase build rates.”
Despite the seemingly positive nature of the scheme, others are more sceptical. Adrian Gill, the director of estate agents for Your Move, continued to voice concerns that while this move may improve demand for property, a lack of homes to purchase remains a key drawback to continued progress. He said: “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.”
What is clear for the majority of the UK is that any assistance in saving towards a deposit for a property in not to be ignored. As the Council of Mortgage Lenders recently confirmed, the mid-point for a first time buyer deposit has now reached £25,500. With many people in the UK finding that the initial down payment is the major stumbling block to buy a home, the proposal may sway a considerable level of voters towards the Conservative party come the general election in May.
Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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