Another Budget has been and gone with very few surprises. Most salient points were either in the Autumn Statement or leaked prior to Budget Day. We have then had a week of comment and criticism. One of the gems on offer that has proved fairly controversial is the Help to Buy ISA. On the face of it a wonderful chance for first time buyers to have their deposit topped up by a whopping 25% when that auspicious day arrives to pick up their first keys.
The ISA should be available on the High Street from autumn 2015 for a period of 4 years. It can be opened with a maximum deposit of £1,000 but the monthly savings are limited to £200. Given that it will take 4 years, 7 months to accrue the maximum of £12,000 even with the deposit and a full 5 years without, the saver will not be able to benefit fully from the bonus until 2020. At the point of house purchase a maximum of 25% of the accumulated deposit and interest is added to the account capped at £3000.
In order to avoid abuse of the scheme the purchaser must use the property as their only home, not to let out and there are caps on the maximum purchase price. The saver can use the ISA earlier if wanted but will forego some bonus but there are no limits to how long it is held before the bonus is claimed. Another plus is that a couple can each have an ISA and use them for one deposit. So future dating websites may also include the acronym ‘must have GSH and HTBISA’!
Critics claim it will cause house prices to rise in 2020 when the savers all cash in their ISAs, that £15,000 is a small deposit now how much will it be worth in 2020, that the scheme will be used by affluent parents who are in a position to help their offspring and would most likely do so anyway and that the money would have been better used for building affordable homes.
Probably all of the above is true to some extent but if it encourages young people (and the not so young) to save and think about being homeowners it can only be a good thing.