That Crucial First Step is Easier to Take – is the Help to Buy ISA Right for You?

Savings
Added on June 1st 2015

That Crucial First Step is Easier to Take – is the Help to Buy ISA Right for You?

The financial crisis of 2008 is still having an effect on the UK’s housing market. Despite headlines telling us that properties in the South East are “earning” around £1,000 a week, first-time buyers are having a hard time breaking into the loop.

One big problem that they face is raising a deposit – 5% at least is needed to get a mortgage. With interest rates so low, savers can find themselves trapped for years waiting for their fund to grow to a meaningful size. All the while, prices are rising and it just becomes impossible for many to catch up.

A helping hand

In 2013 the UK government set up its Help to Buy ISA scheme to help people to get onto the property ladder. Under the Help to Buy scheme, first-time buyers could take out a five-year government loan for up to 20% of the property value, as long as they had at least a 5% deposit saved up. The maximum property value is £600,000, which means some people will need to save as much as £30,000 before they can access government help. This is no mean feat in this day and age.

There’ll be more homes to choose from

This is where a new addition to the scheme comes in – the Help to Buy ISA, which is available from banks and building societies. The maximum monthly amount a person can put into one of these ISAs is £200, with the government adding a further £50 per £200 when the money is finally used. The great thing about this ISA is that it’s an individual, rather than a household, account. If you’re a couple, you can both have your own ISAs, which will shorten the time it takes to reach that magical 5% deposit even more.

The government has introduced the Help to Buy ISA to help people to buy homes worth up to £450,000 in London and up to £250,000 elsewhere in the country and so if this is your price range, and you’re looking for a new-build, then the ISA might suit you. Remember, the government has pledges to build 200,000 new homes a year for the next five years! You’ll be able to open an account from autumn 2015, when the scheme opens, and you can keep adding to your ISA for as long as you need to. Essentially, for basic rate tax payers, the Help to Buy ISA means they can save up money completely tax-free.

Keep an eye out on the Gov.uk website between now and autumn, and start saving up funds to put in the ISA now!

 

 

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