For many first time buyers looking to get on the property ladder, the issue of affordability over the past 10 years or so, has become a major problem. To buy a property, most people would usually save a deposit and then borrow the remainder in the form of a mortgage. It almost feels like a perfect storm has affected 1st time buyers because:

  • They now have to save more towards a deposit than before the financial crises of 2008 because ‘loan to values’ are generally lower
  • Average earnings during this period have not kept pace with house price inflation and
  • The ability to get any kind of interest on those required savings has diminished in line with falling interest rates

However help has been provided with the relatively new Help to Buy ISA’s available from numerous banks and building societies.

With one of these plans you can save an amount of money, receive interest from the Help to Buy ISA provider and then when you are ready to buy your property, you can apply for a Government Bonus.

There are limits on how much you can save and limits on the bonus you can receive, but with interest rates of up to 4% and a 25% additional government bonus on the amount you have saved, I would suggest this makes sense for anyone looking to buy their 1st property over the next few years. That said as always you need to be careful with the T’s and C’s of the individual plans available.

You can save up to £200 per month and in the 1st month on opening an account you can kick start your plan with a lump sum of up to £1,200. The arrangement is available per individual but if two people are looking to buy a home, then they can both benefit from this arrangement. There is a maximum Government bonus of £3,000 so in the case of joint purchasers, that’s £6,000 available as a bonus.

The best rates of interest can be found online. The current deals are all ‘variable rate’ however, so you need to watch them to make sure they do not fall.

There are many questions that you may need answers to, so forgive me if I refer you to: www.helptobuy.gov.uk/help-to-buy-isa/faq/

It is extremely important to state that the above does not constitute advice and because everyone’s circumstances are different, it is always best to seek financial advice.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Author: Phil James, Grosvenor Consultancy Ltd

There are advantages and disadvantages to using all of these strategies and they depend on individual circumstances so don’t take action without seeking competent advice. Tax rules, rates and allowances are all subject to change. The Financial Conduct Authority does not regulate tax advice and some forms of offshore investments. The value of investments and the income from them can fall as well as rise and you may not get back the full amount you invested.

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