Ryan Bembridge analyses the plethora of schemes aimed at first-time buyers entering and leaving the dysfunctional mortgage market
Help to Buy and Lifetime ISAs
The government has also moved to support first-time buyers with the Help to Buy ISA and the Lifetime ISA announced in this year’s Budget.
The Help to Buy ISA allows buyers to receive a 25% government bonus when a buyer purchases their first home to a maximum of £15,000, while the Lifetime ISA allows under-40s to save £4,000 a year with a 25% government top up.
Ray Boulger approves. “It’s a good innovation,” he says. “It gives people flexibility to save and from the government’s perspective it enables people to buy property so they won’t need to be subsidised in retirement.
“To say you can either use this on a house or to supplement income does make it a good product from a consumer’s perspective.
“On a medium term basis the Help to Buy ISA will be superseded.”
Boulger expects more announcements about ISAs in future. “The government wants to encourage both saving and spending,” he says. “Now is a time to encourage people to save because interest rates are so low.”
Combining the schemes
A question mark hanging over the schemes is whether they can be used together.
“The success of the Starter Homes Initiative will depend on whether it can be used with the Help to Buy Equity Loan scheme,” he says.
“Using the Help to buy Equity Loan scheme makes it much more attractive. Without it people might think they can buy a bigger property in a nicer area.”
Williams questioned the introduction of yet another scheme with a new set of rules in the Starter Homes Initiative. “Another announcement means you have to set up processes and procedures,” he adds. “These are all administrative problems. Did the buyer understand it? With so many schemes being introduced there is the question of whether they could get in each other’s way.
“The ink is hardly dry on one initiative before they’ve introduced the next one,” Williams laments.
“There is the suggestion the Help to Buy and Starter Homes Initiative could be linked which would be quite generous.
“But helping the consumer understand they have an equity loan and a discounted product is adding lots of complexity before they are even offered a mortgage.
“Somehow the lender has to work out how much they can afford.
“It’s getting complicated and this is before the courts judge whether the customer is properly advised or not.”
But Jeremy Leaf says there can’t ever be too many schemes encouraging housing market activity, as long as they work.
“The challenge is to support first-time buyers who would otherwise not be able to raise a large enough deposit to take their first steps on the housing ladder,” he says.
“However, the principal problem is ensuring there is sufficient supply to keep prices in check and make sure housing is as affordable as possible.
“Responsible property professionals want to see transactional activity to ensure supply and demand is balanced, rather than boom and bust.”
