The Chancellor of the Exchequer today announced that first-time buyers will get assistance with saving for a deposit via a newly-launched Help to Buy ISA. If you save £200 per month, the government will add a £50 bonus. The maximum bonus you can ‘earn’ is £3,000, enabling first-time buyers to put down a £15,000 deposit with just £12,000 of their own money.
It is good news that first-time buyers will get government assistance with their deposit but it would have been better if the announcement had come hand in hand with detailed plans to build more houses. There is a danger that giving first-time buyers assistance with a deposit will only push up house prices further.
It is great news that accounts are limited to one per person rather than per home as many first-time buyers are couples so this will boost their deposit further.
Some might question whether the £450,000 limit in London will be enough but it is important that there is a limit on the scheme and that ambitions are kept within realistic parameters.
The big issue however, is that even if a first-time buyer can get together a deposit, there is no guarantee that they will be able to get a mortgage. Tighter rules under the Mortgage Market Review mean many people who shouldn’t be struggling to get a mortgage are doing so and this requires government intervention.