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Help to Buy Isa under fire over Govt deposit clause

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It has emerged first-time buyers cannot use the Help to Buy Isa to boost their deposit, after the Government introduced a clause limiting the bonus until after completion.

The Telegraph reports more than 500,000 people have taken out the Isas since they were launched by former chancellor George Osborne in the 2015 Budget.

Help to Buy Isas have been set up to help renters save for a deposit, topped up by a 25 per cent Government contribution or “bonus”.

But the wording of the scheme means the top-up on savers’ cash will not be paid out until the sale has completed.

The Telegraph says the Treasury structured the Help to Buy Isa to stop people using the money without buying a house.

A Treasury spokesman says the Government bonus was meant to cut the size of savers’ mortgages by increasing the equity they put in after completing.

The Help to Buy Isa launched on 1 December. Users can save £200 a month, up to a total of £12,000.

To date less than 1,500 have used the scheme to buy a home.

SAM Conveyancing director Andrew Boast told the newspaper: “It is a scandal. The Government launched this scheme to help people save the large exchange deposit required to buy a home.

“But what unsuspecting first-time buyers are now horrified to discover is that under the scheme rules they cannot use the bonus as part of this deposit.”

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. Well that was a well-thought out bit of policy planning then?

  2. As somebody who was looking forward to using the Help to Buy ISA to save for a deposit, this is absolutely disgusting news. It’s hard enough to get on the property ladder, without the government teasing you with schemes that are literally worthless. The ENTIRE point of this was to help with deposits, what possible madness gripped the idiots in charge of this policy to make the bonus only available until well after the deposit is made? My mouth has figuratively dropped in shock.

  3. Unfortunate but since as a tax payer it is partly my money I want certainty of fate.
    Otherwise we will have folks claiming the cash dropping out leaving the taxpayers the cost of their reps chasing the punters for the money back. What to do if it has been blown on something like a holiday. It’s not going to look good gaoling the astute disingenuous punters is it

  4. But the bonus (which is the only bit we are talking about I take it?) is not massive given the total funding limit, so why the big issue over whether it is included or not? Just let it be included in the calculations.. Let’s face it, £3,000 shouldn’t be a deal clincher for any lender in the current market!

  5. As one of the 1,500 people who have made use of this scheme, I found it fine, to be honest. The bank told me this was the case up-front and it helped my bridge the gap between the mortgage I could get and the purchase price, so it was well worth it.

  6. Not quite… bonus gets paid on completion, not after. It’ll still count towards mortgage deposit. Can’t be used for exchange deposits but they’re usually smaller, and crucially, negotiable with the seller.

  7. I’m not in the mortgage market but I would have thought that maximum LTV is calculated by salary multiples and then 10% of that maximum loan, for a 90% ltv, is required from the borrower as a deposit. So the £3,000 or so of government bonus addition on a maximum-funded (£12,000) right to buy ISA (assuming no growth) forms part of that 10% deposit.

    It is not an earnings related bonus but capital and so it is what it is, £3,000 towards the deposit for a house!

    • Ah, I see, you mean now, yes it is an issue for smaller loans and hence lenders need to make space for it, rather like the government have (and some!) with the help to buy loan scheme.

  8. Mountain out of a molehill being made on this. Lenders will just need to be innovative in assessment with some flexibility to make an immediate reduction to the mortgage say 6 months from completion.

  9. So, if we assume that the bonus us both guaranteed and paid AT completion, is this really an issue or a mere tweaking of procedure? Seems to me that it shouldn’t be as hard as it’s made to appear and, surely, lenders must have noticed this anomaly before now?
    In respect of the lender, proof of the HTB ISA should be enough to know that the funds will be paid. In respect of the capital being paid to buy the house, as long as it reaches the solicitor on the right date, the legal process doesn’t care where it is from, just that it is there.

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