Chancellor George Osborne’s announcement on 18th March is designed to to tackle the two biggest challenges for first-time buyers. He sees these as, the low interest that banks pay to savers, and the large deposits required for property purchase. Always an advocate of home-ownership, it is no surprise that this ‘Help-to-Buy’ ISAs attempts to tackle both issues.
What the government plans to introduce seems on the face of it to be fairly simple. From this autumn, and for 4 years only, they aim to enhance every £200 saved towards a deposit on a first home by a further £50, which is in effect a 25% subsidy. Since a typical first-home deposit is currently £15K then the purchaser only needs to find £12K.
The scheme will operate with property value limits of £450K in London and £250K in the provinces, something that will irk some voters who’ll say that the subsidy would be better used exclusively for cheaper homes where it would go further. Yet only a maximum of £200 saved each month will qualify, and intending buyers will have to save between £1600 (to receive a ‘bonus’ of £400) and £12K (to receive a ‘bonus’ of £3000) over the life of the scheme. But each individual will have a separate entitlement so couples, families, friends and communes can club together. Yet savers will have to be over 16, buying a UK property. And there’s a small catch because first-time buyers will only receive their bonus once they get the keys to their first home, something which may require them to take out a bridging-loan, although no doubt other ways will be found around this obstacle.
Like any intended scheme this may never come to fruition, certainly with a change of government in the wind, but in the meantime some (e.g. those in rented accommodation and others who are not judged first-time buyers) will feel that the scheme unfairly assists already-privileged groups. Others, though, will welcome this as an opportunity and will be eagerly eyeing properties!