The Budget launched what looks like
a voter-pleasing Help to Buy ISA which will act as a 25% top-up on deposits.
The Chancellor described it as a
tax cut for first-time buyers. One delighted agent called it a “very juicy
However, there are also warnings
that the scheme will need to be tightly policed to prevent savers misusing the
scheme and spending the money on other things.
For every £200 that an intending
home buyer saves for a deposit into the new ISA, the Government will top it up
Chancellor George Osborne said the
new scheme could be used by an average first-time buyer needing a 10% deposit
of £15,000. They would now only need to save £12,000, with the Government
topping up the amount by £3,000.
He told MPs: “A 25% top-up is
equivalent to saving for a deposit from your pre-tax income – it’s effectively
a tax cut for first-time buyers.”
The scheme will be available on
properties worth up to £450,000 in London and up to £250,000 outside the
capital. It could also be used by couples buying a home together, potentially
doubling the Government’s contribution to the scheme, which is planned to
launch this autumn.
It met with a largely enthusiastic
reaction from the industry.
Paul Smith, CEO of Spicerhaart,
described it as “a fantastic incentive to start saving”, while Paul Beresford,
of Beresfords Group in Essex, called it a very juicy carrot which would
“significantly help those trying to save in a climate of low interest rates”.
Mark Hayward, managing director of
the NAEA, said: “This initiative will provide a significant boost to the
ability of a first time buyer to save speedily and effectively.
“This is exactly what is needed to
engage the first-time buyer market, particularly as we have seen the current
criteria under the MMR constraining aspirations to buy a home.
“It especially benefits couples who
are buying for the first time as both are eligible to open a Help to Buy ISA
which potentially means £6,000 from the Government bonus towards a new home.
“It is also timely, considering
house price inflation outpaces wage inflation, so this additional boost to
first-time buyers’ savings pots will help them at least keep apace rather than
fall behind the inflationary curve.”
Adrian Gill, director of Your Move
and Reeds Rains estate agents, said it was the Chancellor’s “trump card” but
warned it crept round the elephant in the room.
He said: “This significant new ISA
scheme will help thousands of aspiring homeowners accumulate what they need to
jump on to 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 short cut 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.”
However, Gill warned: “But the
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 home owners 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
Mortgage broker Ray Boulger, of
John Charcol, said: “The scheme will need to be robustly policed to make sure
the savings are not used for other purposes.”
He also said that the fact that
savers had used the Help to Buy ISA would not guarantee them a mortgage.
The most dissenting voice came from
Matt Hutchinson, director of flat and house share website Spareroom.
He said that to get a £3,000 bonus,
saving at the rate of £200 per month into the ISA would take four and a half
By that time, he said, “prices will
likely have risen again and a £15,000 deposit won’t be enough.”