The new help-to-buy Isa launches next week as the government’s latest attempt to give a foot-up to youngsters being priced out of home ownership.
On the surface it is a decent enough idea. Prospective buyers can put away up to £200 a month (£1,200 in the first month), then when they buy a house they receive a 25 per cent top-up to this deposit paid through their solicitor.
If the money is not used to buy a house then they do not get the top-up.
It is basically treating an Isa like a pension in terms of tax relief – except the aim is to fund a home purchase rather than retirement.
It looks simple, it is helpful and it should prove popular. So why on earth has the government arbitrarily decided to shut out many of those who wish to buy property in a wide swathe of the South East – as well as some more prosperous parts of the west country and north west?
It is achieving this by placing a limit on the value of any property that can funded using a help-to-buy Isa to £450,000 in London but only £250,000 outside.
This leads me to conclude that ministers and civil servants have no idea what a starter home or flat costs in St Albans, Horsham, or Berkhamsted.
“This feels like a clause dreamt up by someone in the Treasury who has never travelled outside central London”The limits mean that the help-to-buy Isa will prove useless to youngsters in many areas where help is most needed.
And why this massive differential? Does anyone really believe that a first-time buyer property in Borehamwood costs £200,000 less than one seven miles away in Barnet?
This feels like a clause dreamt up by someone in the Treasury who has never travelled outside central London and believes property in the provinces is as cheap as chips.
It has been suggested to me that house-builders should not be allowed to participate in the help-to-buy scheme outside London unless their starter homes are priced at less than £250,000.
This scheme currently allows equity loans to be used on properties worth up to £600,000.
That is a possibility, but the fact is that the government has got the numbers wrong on the help-to-buy Isa.
The initial signs are that the savings industry has responded positively to the idea.
It would be a shame if a section of the population were to be ruled out of the scheme simply because they lived in an area where you cannot get a first home for less than £250,000.
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A matter of fact
Like all journalists I am greeted every day by a mailbox full of press releases all fighting for my attention.
This week I was greeted by: “Record numbers to consider emerging markets for their retirement funds”.
Next I was told that 87 per cent of over-55s are concerned about a stock market crash affecting their pension (I particularly liked the use of the understated words “concerned” and “affecting”).
To round it off, I learned that investors were missing out on more than £100m because they were less likely to shop around for annuities.
All three are basically about risk and security – and all three reflect the new reality of pensions savings and the uncertainties involved.
The taste for emerging markets is greatest among younger savers and drips off to around 8 per cent of over-55s.
That is a relief – especially in the light of the numbers “concerned” about a stock market crash. What on earth they are doing in the stock market?
As for the annuity shopping around, about 40 per cent were buying from a different provider to the one they saved with.
Bearing in mind that many will now not be buying an annuity, I suspect that those buying one and not shopping around may prove too lazy to do anything, no matter what anyone says or does.
Are you any the wiser? No, neither am I.
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We need more interest in current accounts
I am intrigued by the phenomenon of banks which consistently pay more on current accounts than on savings.
Chief among these is Santander, where the 123 current account pays 3 per cent on up to £20,000. Even after paying a £5 monthly fee it is a very tempting proposition.
That £20,000 limit is more than enough for most people and it is especially appealing to those who cannot be bothered with the hassle of searching out a decent savings account.
I would like to see more like this, but others are either limited by time or by the amount that earns interest.
Surely someone will take on Santander eventually.
Tony Hazell writes for the Daily Mail’s Money Mail section
t.hazell@gmail.com
