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H2B ISA: A drop in the ocean?

Wednesday, 6th May 2015

Categories: Market Analysis Property Prices Sales

Author: Kris White

George Osborne’s last budget before the General Election provided the government with an opportunity to woo first-time buyers to the conservative camp, namely with the introduction of a help-to-buy ISA. The new product is specifically aimed at people trying to save in order to get a foothold on the property ladder. With interest rates still making the mattress look like a viable option for tucking away savings, and house prices showing no immediate signs of abating, all parties are desperately searching for ways to help first-time buyers secure a home.

 

The H2B ISA, which will launch in the autumn, offers first-time buyers a cash incentive to save for a deposit by adding £50 to every £200 banked – not a bad return considering that current interest rates rarely top the 3% mark. As it can take a fair few years for first-time buyers to save enough for a half-decent flat or house, there are no restrictions on the amount of time you can save for, and the ISA is open to anyone over the age of 16, giving plenty of time for forward-planning teens to accumulate a deposit for their first home.

 

A maximum bonus of £3,000 applies to the ISA (with the minimum contribution being £400), and the allowance is available for properties up to the value of £250,000 – although this figure rises to a more generous and realistic £450,000 in London. Savers are allowed to invest up to £200 a month in the ISA but, as accounts can be opened by individuals, as opposed to households, there is the potential for co-buyers to top up their deposit pot by £6,000.

 

The current levels of new-build at around 100,000 new homes a year is well short of demand but all political parties have increasing the number of properties to be built as a high priority. The H2B ISA should help to boost finances and encourage regular savings towards that first home..