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article imageOp-Ed: How will the Help to Buy ISA work?

By Elizabeth Grey     Mar 27, 2015 in Business
London - In the latest budget George Osborne announced a new Help to Buy ISA for first time buyers. How will the Help to Buy ISA work? And will it actually help?
George Osborne has announced his last Budget before the General Election this May. With access to affordable housing still an issue and research showing young people still get help from their parents for deposits, the Chancellor announced the new Help to Buy ISA. Created to give a helping hand to those trying to get on the property ladder, how will it work and will it actually help?
Essentially the Government wants to top up the savings of first time buyers so they have some extra capital to find a home. The whole
thing is quite flexible too. For every £1 you can save in a Help to Buy ISA Government will contribute 25p.
You can save up to £12,000 this way and receive £3,000 assistance in a year. The money will only be available to buy a home.
Setting one up doesn’t take too much money either, all you need £1,000. The ISAs should become available from autumn this year, meaning you won’t have to wait around too long to take advantage of them.
There’s also good news if you’re wanting to buy a property with someone else. Everyone can set up their own individual Help to Buy ISA and contribute to a property purchase, which means the more the merrier when it comes to getting a boost in cash.
There are a couple of caveats though. For example, only first time buyers can take advantage of the scheme. This is to stop those who buy-to-let from getting any Government handouts. You can also only use it when buying a house for under £250,000, or under £450,000 if you’re in London.
That’s the basics. It’s fairly straightforward, you don’t need to be rich to take advantage and, all importantly, you’ll get some free money. The only thing is, it might not be as good as it sounds, which wouldn’t be surprising for a policy announced so close to an election.
First there are concerns that it will cause house prices to rise. The argument goes that as customers will have more purchasing power sellers will up their price accordingly. This makes economic sense, especially if a lot of people take part in the scheme. For those who opt-in, the extra cash might just cover the increase in cost, while those who didn’t take part will be in an even worse situation.
Then there’s the problem of actually funding this idea. As it stands, no one has said where the cash will actually come from. For the time being, that’s not so much of a problem as it’s likely the Government will explain that if they win. It’s just at the moment, announcing more cuts isn’t a great re-election strategy.
In the end, it’s a nice idea, but one obviously geared towards swaying the electorate. It would have a lot more clout if coupled with more new home building, but we’ll have to wait and see. In the meantime, it’ll be wise to make any big decisions after the most important one of all – the election.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
More about Money, Investment, First time buyers, property ladder, UK economy
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