Industry welcomes HTB ISAs but warn housing shortage must be tackled

Following George Osborne's announcement in today's Budget that he is aiming to 'encourage a saving culture' through a Help to Buy ISA, there has been mixed reaction from the industry.

Related topics:  Savings & Investments
Rozi Jones
18th March 2015
Blogs

The scheme will help first time buyers to get £50 back from the Government for every £200 they save, and Osborne has said it will be ready to launch in autumn this year.

Mark Hayward, managing director, National Association of Estate Agents said that the initiative will boost the ability of first time buyers to save speedily and effectively.

He said:

"This is exactly what is needed to engage the first time buyer market, particularly as we have seen the current criteria under the MMR constraining aspirations to buy a home. It especially benefits couples who are buying for the first time as both are eligible to open a Help to Buy: ISA which potentially means £6000 from the Government bonus towards a new home. It is also timely, considering house price inflation out paces wage inflation, so this additional boost to first time buyers savings pots will help them at least keep apace rather than fall behind the inflationary curve.”

Phil Hall, Special Adviser to the ifs said that the ISA should be "praised", pointing out that "the accounts are available on a per person basis NOT per household. This means that a couple buying a house together can receive up to £6,000."

Jeremy Duncombe, Director of Legal & General Mortgage Club agreed, saying that "anything that gives a boost to Britain’s young people looking to get on the housing ladder is broadly welcome."

However, he argued that Help to Buy is "not the same as helping to create homes to buy!" He explained that Britain needs a quarter of a million new houses every year to meet current levels of demand, and that a shortage of housebuilding will only price first time buyers out of the market further, regardless the amount of help they get to save a deposit.

Peter Williams, Executive Director of the Intermediary Mortgage Lenders Association, continues:

“Tax cuts for first time buyers will help to tip the scales in their favour, but they can only so much without more fundamental changes to housing supply and market structures. The Help to Buy ISA will help some households but we must guard against a situation where house prices rise faster than savings – the fate suffered by previous interventions in this area.

“Fragmented policies are not enough to fulfil the dreams of first time buyers; only a fully formed and long term strategy can turn the tide of sharply rising prices and declining owner-occupation."

Jonathan Samuels, CEO of Dragonfly Property Finance, goes further, adding:
 
"Help-to-Buy ISA, or Hinder-to-Buy? The irony of the Help-to-Buy ISA is that it may not help first-time buyers at all.
 
"Throwing £50 at first-time buyers for every £200 they save gets people into the savings habit, which is no bad thing. But if we're not building more homes then it may well drive prices higher in the medium term as even more people compete for the same level of property.
 
"A first-time buyer might be able to put £15,000 rather than £12,000 down as a deposit, but if the property they want has risen even further in value due to the strength of demand, where has that got them?
 
“If the supply issue were dealt with, then yes, the Help-to-Buy ISA could play an important role. The challenge, as ever, is to solve the housing shortage.”

However Richard Sexton, director of e.surv chartered surveyors, says that the initiative will remove some barriers created for first-time buyers.

He explains:

“We have been waiting for consumer confidence to return, and this Budget bolt out of the blue could be exactly what is needed.  The top-up system will provide a route around the problem of saving for a deposit while interest rates are low. And banks are primed, ready and willing to lend to worthy borrowers at higher LTVs. Meanwhile, over the last year, the lending landscape has been overhauled with new regulation, meaning even though first-timers are being given a massive boost, there will be no risk to the sustainability of the recovery. This is an attempt to remove the barriers created for first-timers in the recession, rather than an attempt to win younger votes.”

However the industry did note that raising a deposit is still a genuine barrier for first time buyers, and the scheme will undoubtedly reward sensible saving.

Stephen Noakes, Managing Director for Retail Customer Products at Lloyds Banking Group estimates that the Help to Buy ISA could reduce the amount of time first time buyers have to save by just under a year.

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