Budget 2015: Is the new Help to Buy ISA for you?

Published on 23 March, 2015

Osborne at Downing Street with the famous red briefcase

The Government have announced a new cash incentive for first-time buyers, which will be introduced in the autumn. Essentially anyone who saves into a new Help to Buy ISA will see their savings topped up by 25 per cent when they come to buy their first home.

The incentive will see the government deposit a £50 bonus to every £200 saved up to the maximum hand-out limit of £3,000.

To put this into context, if you were to save £200 each month from September, it will take you four years and seven months to build up £12,000, as you’ll then meet the criteria to receive the £3,000 bonus to buy your first home, which would be in April 2020.

Mr Osborne told MPs: 'The Help to Buy ISA for first time buyers works like this. For every £200 you save for your deposit, the Government will top it up with £50 more. It's as simple as this – we'll work hand in hand to help you buy your first home. This is a Budget that works for you.

'A 10 per cent deposit on the average first home costs £15,000, so if you put in up to £12,000 – we'll put in up to £3,000 more.

'A 25 per cent top-up is equivalent to saving for a deposit from your pre-tax income – it's effectively a tax cut for first time buyers. We'll work with industry so it's ready for this autumn and we'll make sure you can start saving for it right now.'

Our founder and former Managing Director of Hatched.co.uk, Adam Day, commented:

“Helping first time buyers is all well and good, but this will be a perpetual thing if the real problem is not addressed, which is lack of housing. By giving buyers, whether first time, second time, or third time, a ‘leg up’, all you are doing is increasing the demand for buying property without increasing supply of property for sale. Simple economics means prices continue to rise and we will have a never ending cycle of property price rises which are way ahead of inflation and therefore continue to be unaffordable for future generations.

Governments don’t seem to want to address the real issue which is that builders either aren’t building because they can’t get planning permission, or they are not building the right types of property.”

Is the Help to Buy ISA for you?

Although before taking out a new Help to Buy ISA, you should consider factors such as the expectation that house prices will rise.

When it comes to purchasing your first home under the scheme, you’ll also need to consider that the hand-out will only apply to properties worth less than £450,000 in London, or £250,000 elsewhere in the UK.

Under the terms of the Help to Buy ISA you will not be permitted to have more than the one cash ISA per year.

All is not lost however, as if yourself and or a partner were to start saving from September, then that is a total of £6,00 in bonuses from the Government for your new home together, should you save up to £12,000 each, that’s £30,00 in total.

If you are thinking of starting to save for your first home, then there has never been a better time, with the accounts only available for the next four years.

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