House price rises may render Help to Buy Isa boost useless, critics warn

18th March 2015

Experts have cast doubt on how useful the Chancellor’s  Help to Buy Isas will be for struggling first-time buyers.

While many welcomed George Osborne’s promise to launch Help to Buy Isas, in which the Government will contribute £50 for every £200 saved, others warned that rising house prices will outstrip the benefits.

Savers will be able to claim up to a maximum of £3,000 in Government cash, but many experts question whether that will be enough to help many onto the housing ladder.

Jonathan Samuels, chief executive of Dragonfly Property Finance, said: ” The irony of the Help-to-Buy ISA is that it may not help first-time buyers at all.

“Throwing £50 at first-time buyers for every £200 they save gets people into the savings habit, which is no bad thing.

“But if we’re not building more homes then it may well drive prices higher in the medium term as even more people compete for the same level of property.

“A first-time buyer might be able to put £15,000 rather than £12,000 down as a deposit, but if the property they want has risen even further in value due to the strength of demand, where has that got them?”

Campbell Robb, Shelter’s chief executive, said: “We need to double the number of homes built a year to solve our housing shortage, and this is yet another example of government attempting to put a sticking plaster over a gaping wound.

“Only measures that actually build more homes will make a material difference to all those priced out and struggling with sky high housing costs. Put in black and white, the money spent on this scheme could build almost 65,000 affordable homes.

“It’s time for politicians to stop with the smoke screens and get to grips with the root of the problem. We won’t rest until we see a comprehensive plan that will get to the core of our broken housing market and finally deliver the homes we need.”

Jeremy Duncombe, director of Legal & General Mortgage Club, said:  “Anything that gives a boost to Britain’s young people looking to get on the housing ladder is broadly welcome. However, Help to Buy is not the same as helping to create homes to buy!  Larger deposits for FTBs are only one piece of the puzzle – we need suitable, in-budget housing stock for first time buyers (and indeed the rest of the market!) to access.”

“Britain needs a quarter of a million new houses every year to meet current levels of demand. Without this, house prices will continue to rise above the level of inflation which will price first time buyers out of the market, regardless of the size of deposit they are able to save.”

However, Mark Hayward, managing director, National Association of Estate Agents  was more optimistic.

He said: “This initiative will provide a significant boost to the ability of a first time buyer to save speedily and effectively. This is exactly what is needed to engage the first time buyer market, particularly as we have seen the current criteria under the Mortgage Market Review constraining aspirations to buy a home.

“It especially benefits couples who are buying for the first time as both are eligible to open a Help to Buy: ISA which potentially means £6000 from the Government bonus towards a new home. It is also timely, considering house price inflation out paces wage inflation, so this additional boost to first time buyers savings pots will help them at least keep apace rather than fall behind the inflationary curve.”

1 thought on “House price rises may render Help to Buy Isa boost useless, critics warn”

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