Who has benefited from Help To Buy?

Help to buy

The latest statistics1 show the scheme has  helped over 220,000 home-buyers. The average house price across the scheme is £191,000, illustrating that it’s helping people buy at the lower end of the housing market. With the government having pledged earlier in the year to fix the UK’s “broken housing market” it’s welcome news that over 180,000 of those using the scheme are first-time buyers.

There is a Help to Buy ISA (closing on 30 November 2019), that lets first-time buyers save for a deposit tax-free.  You open your ISA with an initial lump sum of up to £1,000, and can then save up to £200 per month (so in the first month you can deposit £1,200 in total).  You can miss monthly deposits but you can’t roll them over, so the maximum you can pay in is always £200.  You can save up to £12,000 in total (deposits plus interest) and when you use the ISA to complete the purchase of your first home, the government adds a bonus of 25 per cent (so a £12,000 ISA is boosted to £15,000).  If you choose not to buy a home you can still take the money, but you won’t get the 25 per cent bonus. You’ll need to save at least £1,600 to qualify for a 25 per cent bonus (meaning you’d withdraw £2,000 in total).

A couple who buy a home together, each using a maximum Help-to-Buy ISA, would have their £24,000 of savings boosted to £30,000 – that’s £6,000 of free money.

However make sure you plan a long way ahead, even if you save up at the fastest rate of £200 a month, it will take you just over four and a half years to save the maximum amount of £12,000.

Also it’s important to remember that you will only receive the 25 per cent top-up after your home purchase has completed. This means (unfortunately) that you will need to source the additional money for the house purchase from somewhere else. For instance, you could borrow the money from your parents on the basis that you will be able to repay it very soon from your ISA bonus.

There is also a Help to Buy Equity Loan scheme that provides a government loan of up to 20% to first-time buyers and existing home owners in England which is added to their own 5% deposit. In Scotland, the loan can be up to 15%, and is available for new-build property.  The London version of the scheme offers equity loans of up to 40% of the purchase price, and requires a 5% deposit.  There are conditions and restrictions attached to the scheme and it may not be appropriate for everyone.

It’s always worth seeking advice from an independent mortgage adviser, who can find you the very best mortgage deals from the whole of the market.  In addition, an they can be particularly helpful if you’re raising money from another source.  For instance, if you hope to get some of the deposit from your parents, then your mortgage adviser can enable them to find the most effective way to help without overstretching themselves or taking unnecessary risks.

1Gov.UK, Dec2016