Being so close to an election, last week’s budget was always going to be aimed at voters and this has not disappointed. What we have also seen is an interesting new innovation and the Help to Buy ISA is warmly welcomed.
The day to day reality is that First Time Buyers are struggling to get on the property ladder. The biggest stumbling block is normally around lender affordability, closely followed by the deposit required. Of the limited details available at the time of writing, for every £200 saved in to the Help to Buy ISA, the Government will add an additional £50 in an attempt to ‘work hand in hand’ to help consumers purchase their first property (to a max of £3k). Accounts will be available through banks and building societies from Autumn 2015 and the bonus payment is paid when you actually buy your first home. Having seen some budget figures, it is suggested that this will create a rather large £835m spend in the Governments figures by 2019/20, so it will be interesting to see what deadline they put on purchasing a property after the scheme ends in four years time. The bigger question is where are these houses? Already there is a large shortfall of houses across the country, especially with new builds, and an increase in demand is probably not going to help.
The Chancellor stated at the outset of his speech that this would be a “budget for the homebuyer, the self employed and business owner”, all of whom have struggled over the years to easily obtain mortgage finance. More recently, with increased competition across the market, we have seen some lenders beginning to relax criteria to assist these particular types of customer. Flexibility was also given to 5m pensioners who may access their annuity pots from April 2016. This, in addition to the new pension rules coming in next month, will create an increase in demand for property sales. But before you go withdrawing your life savings, seek independent professional financial advice. If funds are to be withdrawn to put towards property purchase, be aware that not all lenders will look to lend to those already enjoying retirement.