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Budget: Help-to-Buy Isa

New Help-to-buy Isa a first step for buyers ‘but not the solution’

Property for saleThe launch of a new savings product for first-time buyers was a surprise package in the 2015 Budget – but it fails to address the problems faced by aspiring homeowners, industry commentators say.

The help-to-buy Isa will see the government top-up accounts that are being used to save for a deposit, adding £50 to every £200 saved, up to a maximum of £3,000.

The accounts will be available per person, meaning couples will be able to build up a total bonus of £6,000 on top of their own savings. The payout on the product, to be launched this Autumn, will come in the form of a bonus that’s distributed only once the buyer gets the keys to their first home.

The Isa will be available on homes worth up to £250,000 (£450,000 in London).

But the plan does nothing to tackle the biggest problem facing first-time buyers – an affordable homes shortage that is pushing house prices up in many areas of the UK.

Jeremy Duncombe, director at Legal & General Mortgage Club, said: “Larger deposits for first-time buyers are only one piece of the puzzle – we need suitable, in-budget housing stock for first time buyers (and indeed the rest of the market!) to access.

“Without this, house prices will continue to rise above the level of inflation which will price first time buyers out of the market, regardless of the size of deposit they are able to save.”

And Jonathan Samuels, of Dragonfly Property Finance, warned that the Isa may even prove counterproductive for first-time buyers.

“Throwing £50 at first-time buyers for every £200 they save gets people into the savings habit, which is no bad thing,” he said. “But if we’re not building more homes it may well drive prices higher in the medium term as even more people compete for the same level of property.

Under 30s typically spent £7,046 on mortgage repayments last year and an average of £619 in February 2015, figures show.

Gavin Littlejohn, founder of the Edinburgh-based online budgeting platform Moneydashboard, said: “This may be in reach for some but the real issue is that the barriers to getting a mortgage have been far too big. Young people all around the UK dream of having an affordable home to call their own and today’s budget has only done a little to help make that dream a reality.”

Philip Hogg, chief executive of trade body Homes for Scotland, said: “The Chancellor has again delivered welcome support for home buyers with this new Help to Buy ISA but unless urgent action is taken by the Scottish Government to address the housing crisis here it could be of little use.

“Whilst there have been big jumps in the number of new homes started in England as a result of radical measures on planning and the introduction and subsequent extension of the Help to Buy shared equity scheme, the picture in Scotland is very different.

“Although the Scottish Government’s Help to Buy shared equity scheme has been an unqualified success and a major boost to the construction of much needed new homes, we face its effective end in just a few months as funding has not reflected need and demand, leaving Scotland’s buyers and builders with an uncertain future.

“As Westminster parties set ambitious targets to increase building ahead of the general election, Scotland lags behind.

“The Scottish Government must get to grips with Scotland’s housing crisis now and take the bold action which is necessary to ensure we have enough homes in the right locations to house our growing population.”

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