Wickhurst Green Horsham

Homes “too expensive” for Help to Buy ISA

Would-be-homeowners in large parts of England are being priced out of a government scheme to help first time buyers.

The Help to Buy (HTB) ISA was introduced in December 2015 to allow first time buyers to put their deposit into a tax-free savings account and get a 25% bonus up to £3,000 when they buy their home. However, the bonus is only available if the property purchase price does not exceed the cap of £250,000 or £450,000 in London.

The English Regions data unit analysed the average asking price of properties in almost 1,000 local areas on the property website Zoopla.

  • Overall outside of London, two-bedroom homes exceed the cap in 28% of the areas analysed
  • Average asking prices exceed the cap in 67% of areas in the South East, 65% in London, 61% in the South and 53% in areas in the East.

The cap on purchase prices for a help to buy ISA should encourage house builders to develop smaller homes. Richard Donnell from Hometrack said “There is a lack of supply of two-bedroom homes and this keeps the price gap narrow and relatively close to three-bedroom prices.” Hometrack figures, based on prices paid for homes between June 2015 and January 2016 show how prices for two-bedroom homes at the higher end of the range cost as much or more than the lowest-priced three-bedroom properties in the same area.

Elsewhere, in Australia, first time buyers in some states are given a grant of up to $10,000 (£5,091) when purchasing a property. In the US, various states offer incentives. In Florida, for example, the state government uses tax credits to make mortgages easier to afford once the property is purchased. China has a mandatory deposit of 25% or more but this is cut to 20% for first time buyers in large cities such as Beijing.

However, Martin Lewis of MoneysavingExpert.com said that savers should not be put off opening a HTB ISA. “Even if you don’t end up using it to buy a house, you still have savings with a very favourable rate of interest.” He added that from next year the government was launching its lifetime ISA, with a limit on house purchases of up to £450,000 and that people could transfer in their savings from an HTB ISA.

If you have any concerns contact us for further advice.

Information provided by BBC: England – BBC News

Picture from:  RightMove

      

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