Last Wednesday, the Chancellor of the Exchequer delivered what could be his last Budget. This is when the government sets out its intended spending and tax initiatives for the coming year. This year, alongside the usual tax increases and cuts, George Osborne announced Help to Buy ISAs.
The Help to Buy ISA offers a bonus for those saving up to buy their first home. It’s a type of cash ISA specially designed to reward first time buyers with a 25% bonus. If you’re not sure what a cash ISA is, read What is a cash ISA and should I have one?
With this new ISA, which will be available through bank and building societies from autumn 2015, for every £200 you save the government will give you an additional £50. Individuals over 16 can open a Help to Buy ISA. You can take your savings out whenever you like but the bonus is only paid when you buy your home. The maximum bonus payable is £3,000. This means that if you save £12,000, you’ll end up with £15,000. It’s not often you get something for free!
Help to Buy ISA facts
- You’ll be able to open an account at any time during the 4 year period starting this autumn
- If you’re saving as a couple, both of you can open a Help to Buy ISA, so you can each benefit from the max. £3,000 bonus.
- There’s no minimum amount you have to pay in each month, but you’re only allowed to pay in up to £200 per month per ISA
- You can open the account and immediately pay in £1,000 if you wish
- The bonus is going to be available when buying a house for up to £250,000 outside London and up to £450,000 in London.
The new ISA has been welcomed by some and scoffed at by others. One criticism is that £15,000 wouldn’t be enough for a 10% deposit in most parts of the UK. However, most people aren’t able to buy a property alone so two people together could save £24,000 over 5 years and that would be turned into £30,000. Of course, this still might not be enough to buy in London.
Team the Help to Buy ISA with the proposed starter homes, and it should become easier for first time buyers over the next few years. As a girl who’s determined to buy a house in the next 4 years anything that’s going to help this happen is music to my ears.
What do you think of the Help to Buy ISA? Share your thoughts in the comments below.