Help to Buy Isa scandal: 500,000 first-time buyers told scheme cannot be used for initial deposit on homes
T he Government’s much vaunted Help to Buy Isa was on Friday described as a “scandal” after it emerged that first-time buyers will not be able to use it for an initial deposit on their new home.
More than 500,000 savers have opened the accounts after being told by George Osborne, the former chancellor, that it provided “direct government support” for those saving for a deposit, as a way of getting “Generation Rent” on to the housing ladder.
But on Friday it emerged that a flaw in the scheme means a 25 per cent government “bonus” on savings will not be paid out until the sale has completed.
Experts say this renders the scheme technically useless as it is designed for those who are struggling to find the initial outlay involved in buying a home and means they will still be reliant on loans from their parents, if available.
B uyers are usually required to provide a deposit of 10 per cent of the value of the home when they exchange contracts, and for many first-time buyers this is all the equity they have to put into the purchase.
The small print means the bonus cannot be used for this initial deposit, and can only be spent as part of the purchase cost, for example on mortgage payments, once the deal is completed.
The Treasury has been forced to admit that the clause was included to stop people benefiting from the bonus without actually buying a house.
The accounts, which were launched last year, let customers save £200 a month to which the Government adds £50, up to a final total of £15,000.
S o far fewer than 1,500 people have used them to help buy a home as the limit on how much can be paid in means they have only just accrued a realistic amount to put toward a deposit.
Andrew Boast of SAM Conveyancing, said: “It is a scandal. The Government launched this scheme declaredly 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.”
Sources at high street banks said they were unaware of the restrictions, which state: “The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.”
Banks and building societies have been selling the Isas on the premise that they can be used to boost home deposits. They may now be forced to change their advertising.
H SBC’s website reads: “Saving up for a deposit for your first home? Open an HSBC Help to Buy Isa and the UK Government will reward you with an additional 25 per cent of the amount you save, up to a maximum of £3,000.”
A promotional video by Halifax claims it helps customers “save for a bigger deposit”. Natwest provides an online tool to show how a Help to Buy Isa could “help save for the deposit on your first home”.
They echo Mr Osborne’s comments when he launched the scheme. He said: “This new Isa provides direct government support to anyone saving for the deposit on their first home.”
O n Friday night the Treasury backtracked on the stated original aim, claiming it was never intended to boost deposits. A spokesman insisted the bonus was instead designed purely to reduce the size of buyers’ mortgages by boosting the equity they put in on completion.
After The Telegraph raised the issue, the Treasury updated its Help to Buy Isa web page to make the clause more prominent.
Experts who had previously praised the scheme criticised it for simply providing a “perk” to savers who could already afford a home.
The need for a large down payment remains the biggest block to home ownership, the intermediary mortgage lending association says. The average first-time deposit has risen to £33,000, according to Halifax.
D anny Cox, head of financial planning at Hargreaves Lansdown, added: “Hundreds of thousands of Help to Buy Isa savers risk finding a last-minute hole in their finances.”
HSBC said it trained staff to ensure they provide all the relevant information when a customer opens an Isa.
A Halifax spokesman said it would not be appropriate for it to go into details of the scheme rules with customers as it was defined by the Treasury.
NatWest said the scheme had helped some of its customers buy a home.
A Treasury spokesman said: “It has always been the case that money saved in a Help to Buy Isa is for an exchange deposit, with the bonus of up to £3,000 per Isa from the Government going toward the total funds available for the property transaction.”
Case study: 'Help-toBuy Isas let us down and now we need a credit card loan to buy our home'
G emma Moreton, 29, from Woburn Sands is one of the first Help-to-Buy Isa savers to discover she is unable to use her Government bonus to boost her exchange deposit.
Mrs Moreton, a retail manager, and her husband have been using the scheme since early 2016 to save for their first home.
They have amassed around £4,000 and were expecting a £1,000 bonus to put towards their deposit.
H owever when they came to exchange contracts they were told they would have to forgo the £1,000 bonus if they used the money to fund the 10pc exchange deposit they needed for their new-build two bedroom home.
The couple now face a dilemma: borrow money using a credit card or abandon the purchase and start saving again.
Mrs Moreton said: "We are extremely angry with the Government for making it so difficult to claim the money that was meant to 'help us to buy'.
"We are also disappointed with how misinformed the banks and solicitors all are with the Help to Buy Isas as they seem just as confused as we are. We feel let down and stressed as we now face losing the home we thought we were buying.
"Unfortunately we don't have wealthy parents who could help us out so we are now looking at taking out a credit card."
Have you had a problem with Help to Buy or buying a house in general? We want to hear about it. Email:katie.morley@telegraph.co.uk.
Follow Telegraph News
Follow on Facebook
Follow on Twitter
READ MORE ABOUT:
Follow Telegraph News
Follow on Facebook
Follow on Twitter
News latest
Duchess of Cambridge goes back to school for first visit of 2018
Emily Thornberry repeatedly refuses to condemn John McDonnell for 'stain of humanity' remark aimed at Esther McVey
Australian girl who was face of iconic Akubra hat commits suicide aged 14 after being bullied online
I'm A Celeb's Toff meets Jacob Rees Mogg on tour of Commons as she holds talks on engaging young voters
Remains found in garden of house where woman allegedly claimed to have killed her father
Shocking video shows teacher being handcuffed at school meeting
Revealed: The world's most powerful passports for 2018
Gallery: Pictures of the Day: 10 January 2018
Supermarkets urged to cut down on pre-prepared veg as clean eating trend boosts plastic waste
Oprah Winfrey vs Donald Trump in 2020: A mudslinging match for the ages
Carrie Gracie speaks Mandarin on the Today programme, as listeners applaud her 'defiance'
Humpback whale ‘saves’ marine biologist from tiger shark
What is Article 50? The only explanation you need to read
New 'softer' Army recruitment ad 'neglects the main group of people who are interested in joining', says former Army commander
Key Jeremy Corbyn ally urges Labour-run councils to double tax on wealthy homeowners
Ecuador could remove Julian Assange from London embassy as situation 'not sustainable'
Japanese astronaut apologises for 'fake news' after tweeting he had grown 9cm in space
Comment: Why Carrie Gracie's principled stand made the biggest headlines
Brexiteers to give Michel Barnier hamper of English wine and cheddar in show of UK's strengths
Teenager charged over death of shopkeeper after 'cigarette row'
© Telegraph Media Group Limited 2018
We've noticed you're adblocking.
We rely on advertising to help fund our award-winning journalism.
We urge you to turn off your ad blocker for The Telegraph website so that you can continue to access our quality content in the future.
No comments:
Post a Comment