In efforts to help first time buyers in an unfavourable market, the government has announced they will “boost” deposit savings to help with buying a house. £50 can be claimed for every £200 saved with the new Help to Buy ISA. Find out how you can claim your contribution.
Follow up to the Help to Buy (HTB) scheme
The HTB scheme was introduced in April 2013 followed by the Loan Guarantee in the September following. These initiatives have been highly successful in helping young couples and families with buying their first home.
To date, almost 90,000 people have been helped onto the property ladder by the Help to Buy scheme.
The Help to Buy ISA is the next in line, expected to be available by autumn 2015 and is estimated to cost £2.2 billion in the period to 2019-2020.
The current challenges
Currently, the key issues for first time buyers are:
- Rising house prices
- Inability to save for a deposit
- Banks and lenders are reducing income multiples
- Unable to benefit from some of the low rates of interest available to other borrowers
The Help to Buy ISA is geared to help tackle the deposit issue for first time buyers, along with the fact that interest rates are low on savings.
The Help to Buy ISA
The average deposit required by a first time buyer is now estimated at £15,000. Using the new Help to Buy ISA, homebuyers would save £12,000 and the government would contribute £3,000.
7 key points about the ISA include:
- You have four years to open a new account
- There is no limit on how long you make savings for
- Savings are made monthly with a £200 maximum limit
- There is no minimum monthly contribution
- You can make a £1,000 deposit upon opening the account, if desired
- The “Help to Buy bonus” is per person, not per home – couples can effectively save double
- The scheme’s applies for property up to £450,000 in London and £250,000 for other parts of the UK
The scheme is already taken some criticisms from financial experts though so there could well be some minor changes to the specifics.