Tuesday, April 5th, 2016
Our Internal Conveyancer Trainer Stevie Walters opinion on the Help to Buy ISA’s who herself looking for the perfect first home to buy
In recent years there have been a lot of ideas and proposals of how to help first time buyers into the property market. The property crash in 2008 stopped the flow of the 100% mortgages and all lenders became increasingly worried about providing mortgages to anyone who deemed unable to provide a 25-40% deposit on their dream home.
As a result the government wanted to try and assist the first time buyer and get the market moving again by providing various types of Help to Buy schemes which were widely welcomed.
The basis of which were the government backed loans to first time buyers at a reduced interest rate which would top up the contribution of the purchase price between 5% and 20%. This has allowed the first time buyer on to the market with a smaller deposit. Although in their infancy in the main these schemes have been successful and the publicity has been positive.
When the stricter lender rules came into effect in 2015 it brought with it the harsh realisation that owning your own home was still not a given and affordability was as important as the deposit you had.
The government has again had its thinking cap on and tried to assist first time buyers with not only help to buy mortgages but also a new saving scheme – The Help to Buy ISA. As an aspirational home owner for every £200 I deposit within the Help to Buy ISA savings account the government will give me an extra £50 towards my deposit up to a maximum of £3000. This cannot be a bad thing surely?
The schemes are attempting to be very simple and allow eligibility to be fairly wide, however there are some stipulations to be aware of. You are not able to utilise a separate cash ISA within the same tax year to save money.
There are also strict rules about the limit of the deposits that can be made each month which may put certain savers off the scheme. A buyer is not able to cash this ISA in themselves, instead it must be performed by their acting solicitors/conveyancer at the time of the transaction proceeding. Plus the scheme does not apply to purely cash buyers only those purchasing with a mortgage.
High street banks are very keen to promote these savings accounts as it demonstrates to them the person’s ability to save and budget which goes hand in hand with the affordability criteria the lending rules demand.
It is a scheme to incentivise and reward individuals who save and hopefully increase the numbers of people being able to afford their first home. Anything that gets people saving and aspiring for their own home can only be an encouraging step. We will have to watch this space to see its impact over the next few years but in the meantime sign me up.
Should you have any questions please contact the team