"What this latest development means is that only those buyers who can access the extra cash needed from the Bank of Mum and Dad or other sources will be able to get on the property ladder"
Having seen them happen before we have become not so much accepting of them but certainly prepared for them. There is regularly talk about what the next big scandal will be. However, I think it’s fair to say the recent Help to Buy ISA issue has taken us all by surprise.
For those of you not familiar with it (yes that’s unlikely given the press coverage but it has been holiday season) allow me to summarise. Last December the Help to Buy ISA was launched promising to help first time buyers save for that all important deposit by offering them a savings vehicle which came with a bonus of 25% from the government. The maximum the buyers could put into the account was £12,000 (with no more than £200 deposited each month) and, as such, the maximum contribution they would receive from the government was £3,000.
At the time it was hailed as a great idea. Free money! And a good tool for encouraging would be buyers to save. Indeed, it harked back to the old days. Take your time, save properly and make it onto the housing ladder.
All was well and good until last month when it was revealed that the government’s bonus wouldn’t actually be paid out until the sale has completed - much to the shock of the 500,000 savers banking on the bonus to raise a big enough deposit.
If we’re being positive one can say this is still a useful product, there are plenty of costs involved once a house has been bought including renovations and it’s still free money. However, can it legitimately be seen as a scheme to help people to buy a house. No it can’t and as such it is the latest scandal to rock the industry.
What this latest development means is that only those buyers who can access the extra cash needed from the Bank of Mum and Dad or other sources will be able to get on the property ladder - a familiar situation for many desperate first time buyers at present.
Sadly this comes at a time when the number of high LTV mortgages is continuing to drop.
I think the onus is now on lenders to develop more products suitable for first timers. It’s time, as an industry, we ask ourselves - are first time buyers really the lifeblood of the market as we’ve always said? And if so, let’s prove it.
