The Help to Buy ISA

Last month’s Budget contained good news for prospective first time buyers with the announcement of the Help to Buy ISA.

It won’t actually be available until the Autumn but when it does launch the scheme will let savers deposit £1,000 up front and then add up to £200 per month thereafter. When they use that money as a deposit for their first home the government will pay out a 25% bonus, up to a maximum of £3,000. One ISA is available per person so couples could potentially gain £6,000 from the scheme.

That’s a much higher return than regular savings accounts offer and is bound to prove very attractive, but the £200 per month limit means it’ll take some years to reach the full benefit. That said, it’s not the only savings route available and a 25% return on some saving is still much better than on none.

They’ll be available from banks and building societies as current cash ISAs are but we don’t yet know what the actual products will look like – expect to see more information coming out around August and September. Until then, it’s worth building up (or perhaps freeing up) that first £1,000.

The other good news – somewhat overlooked – is the raising of the tax-free savings allowance to £1,000. That means the first £1,000 interest earned on savings will be entirely free of tax, which will be more than enough for the vast majority of savers (especially with savings rates as low as they are at the moment) and basically makes the cash ISA redundant.

Effectively savers will get a 20% boost in the interest they earn (since that’s the tax they’re no longer paying) which can only help accumulate a deposit quicker and, again, is significantly better than not having it.

Of course this is all fairly long term but both the Help to Buy ISA and the increase in personal allowance offer substantial benefits compared to the existing regime, and hopefully will help boost the confidence of potential buyers.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE