Help to Buy and Outpriced First-Time Buyers

Despite the government’s Help to Buy initiative, many first-time buyers are being priced out of purchasing a home.

The Help to Buy Isa introduced late last year aims to help people buy their first property. An investigation by the BBC however has found that the initiative does not apply to those buying in large parts of the country. There is a cap on the property value for which the Help to Buy Isa applies, which is £250,000 or £450,000 in London. If those that have saved into the Isa wish to buy a property worth more than the stipulated amount, they will not benefit from the government interest.

What is a Help to Buy Isa?

First-time buyers are able to save money into a Help to Buy Isa, with the government adding 25% of whatever is in the account, with £3,000 being the maximum amount paid out. The Isa is only available to those that have never owned their own property (in the UK or anywhere else in the world). Any property you do purchase using the Help to Buy Isa must be done so via a mortgage and cannot be bought as a buy-to-let property. More information on how Help to Buy Isas work can be found here.

Property Exceeding Price Caps

According to the BBC, the average asking prices exceed the Help to Buy cap in 67% of areas in the South East, 65% in London, 61% in the South and 53% in the East. In the North East, the Midlands, Yorkshire and Lincolnshire however, the cap is exceeded in just 5% of areas. Despite this, the Help to Buy Isa is a good savings method, even if those saving into the account do not buy a house (and lose out on the government bonus as a result). The rate of interest is reasonable, you have the option of taking a bonus of up to £3,000 and you may also transfer your savings into a Lifetime Isa.

Read the full BBC report on Help to buy Isas.