The approach of the 2015 General Election has brought with it a vast array of pomp, policies and promises intended to secure the votes of the equally diverse factions of the UK public.
But before campaigning began in earnest, a plan was unveiled by George Osborne in March’s budget which promised first-time buyers up to £3000 in Government top-ups. For every £200 aspiring homeowners save, Osborne said, the Government will boost the amount by an extra £50, with a maximum pay out of £3000 for those who save £12,000.
On the surface the proposition certainly seems attractive, but what about the small print? We take a look at the pros and cons of Osborne’s Home Buyers’ ISA to help first time buyers make up their mind come election day.
The Home Buyer’s ISA – The Pros
Even for those in a steady job who can afford monthly mortgage payments, saving up thousands of pounds for a deposit can be impossible. In fact, according to Stephen Noakes of Lloyds Banking Group, saving for a deposit is a ‘key barrier when trying to buy a first home’. Osborne’s ISA will reward positive savings behaviour and make a real difference in helping people get a foot on the property ladder.
By offering a 25% increase on savings of £12,000, the planned top ups are more than just a token boost, and offer more tangible benefits than other options currently available to first time buyers. Also, as savings will be held in ISAs, they’re tax free.
In combination with other government-backed initiatives such as the Help To Buy scheme that enables buyers to purchase property with a deposit of 5%, the new Homebuyer’s ISA makes saving for a deposit a real possibility for those who would never have been able to otherwise.
The Home Buyer’s ISA – The Cons
Savings are limited to £200 a month, which means it will take five years for first-time buyers to benefit fully from the scheme. By the time they are able to save the full amount allowed property prices are predicted to have risen considerably.
It’s feared that the ISA will fuel demand for homes at a time when too few are being built to keep up with demand. This in turn will contribute towards further pushing up house prices. Campbell Robb, chief executive of the charity Shelter, has even gone as far as to call the plans a “smoke screen” over the drastic housing shortage.
The bonus is only available on house purchases of up to £250,000 (and £450,000 in London). With prices soaring, this could cause difficulties for buyers looking to purchase in larger cities such as Bristol, where the average price of a semi-detached property last year was £257,815.
The Roundup
Even after a précis of the main arguments for and against Osborne’s plans, it’s difficult to tell whether or not they’ll have a significant effect on tomorrow’s election. In fact, when talking to The Express, Miles Shipside of Rightmove summed things up particularly well:
"If you’re setting up home, moving jobs or your kids need to be in a new school, your personal housing agenda is perhaps higher than the bigger-picture political one… as we approach the election the highest ever cost of housing sets an interesting challenge for political leaders.”
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(Image: HM Treasury under CC BY-NC-ND 2.0)
