Help to Buy ISA a game changer

Rob Clifford is chief Executive at CENTURY 21 UK and a director at Moneyquest


When you hold a Budget just weeks away from a General Election there is inevitably some suspicion that the series of measures announced exist in something of a political Twilight Zone.

This especially seems the case when you are developing policy changes for instance that will launch in the Autumn – if a week is a long time in politics then what about six months?

So much can happen between now and then, and judging by the opinion polls, it is likely to be an incredibly close result and a very interesting period in UK politics.

My point is that you have to wonder with a pre-Election Budget just how many initiatives and measures will actually make it to the starting grid because (if we assume a change of party) there is nothing that a new Government relishes more than repealing the announced measures of the former occupants.

However, for financial services in particular the prized asset of certainty is much coveted and it was therefore somewhat reassuring to see Ed Balls suggesting that, if Labour came to power, there would be no back-tracking on the Budget.

Which is probably about as close as we’re ever going to get to the two largest parties delivering us an aligned position.

Given this, it is now possible to plan and prepare for a number of the Budget announcements but perhaps of most interest to mortgage brokers is the Help to Buy ISA, which proved to be another ‘rabbit from the hat’ by George Osborne.

Now, much has already been written about the product and the nature of the Government bonus, when it will be paid, how long first-time buyers will have to save for, the fact they cannot take out another Cash ISA during the next tax-year, and so on.

But at its very heart appears to be an acknowledgement from the Government that potential first-time buyers have been looking for – namely saving for a deposit remains the biggest single challenge for most people who want to buy their first home.

The Government incentive – a maximum of £3k per individual if they save £12k – is, if you look at the current interest rates available on cash ISAs, spectacularly good, and it does incentivise and should breed a strong savings habit amongst younger potential buyers.

Let’s not forget this type of ISA can be opened for anyone over 16 years old and there is no timescale on when they will be able to use the savings therein, irrespective of the fact that new accounts will only be available for four years.

What I believe would now be a good move for those providers manufacturing Help to Buy ISAs is to work very closely with the mortgage advisory community because there’s absolutely no doubting that they will play a hugely significant role here.

Not only are they likely to be a good route to first-timers who would benefit from saving in such an account, they can also guide them through the mortgage maze when they feel they’ve saved sufficient deposit.

Let’s also not forget that individuals don’t need to save the maximum £12k as they will receive £50 for every £200 saved – with a minimum of £400 needing to be deposited - so there will be first-timers who might be using their Help to Buy ISA as early as the end of this year.

Having the mortgage adviser involved, and playing a pivotal role, would be a smart move for the savings providers and the Government.

To this end, I would even suggest that the providers incentivise and reward advisers in helping potential first-timers to set up their Help to Buy ISAs.

Undoubtedly there will be many different variations of Help to Buy ISA with different rates and it would help to have a professional adviser to ensure the individuals gets the right product for them: satisfying the cornerstone of the regulated regime which is to enhance consumer protection

There ideally needs to be a seamless transition from Help to Buy ISA selection through to mortgage advice when the deposit savings have been accumulated.

It could help advisers to develop strong relationships with the next generation of property buyers and establish new clients that could last a lifetime.

Establishing a fresh savings culture is important indeed, but professional advice and experienced guidance is priceless. A perfect opportunity to establish mortgage intermediaries as the integrated solution for this changing landscape.