Gemma Harle: The government could scrap Help to Buy in favour of the Lifetime ISA

In the next Budget the government may scrap Help to Buy for a Lifetime ISA since those on Help to Buy are struggling to remortgage, Gemma Harle, managing director of Intrinsic mortgae network, has predicted.

Gemma Harle: The government could scrap Help to Buy in favour of the Lifetime ISA

In the next Budget the government may scrap Help to Buy and instead focus on the Lifetime ISA for those struggling to get on the housing ladder, Gemma Harle, managing director of Intrinsic mortgae network, has predicted.

Harle believed with the end of the Help to Buy scheme looming in 2021 it’s likely that the Budget on 29 October will contain some commentary on what will happen to the scheme in the near future.

She said: “While the scheme has heralded some results, it is under pressure and has been widely accused of serving to inflate housebuilder share prices, alongside with some unintentional consequences resulting in homebuyers ending up as mortgage prisoners.

“Those who first took advantage of scheme five years ago and are looking to remortgage are finding they are trapped paying an expensive variable rate mortgage with few options from lenders elsewhere.

“The government therefore may choose to scrap the scheme and instead favour the Lifetime ISA as a means to boost home ownership thanks to its flexibility and the potentially confusing overlap in policymaking.”

Harle also talked of the rumoured 3% surcharge of stamp duty for foreign buyers looking to buy property in the UK,which the Prime Minister Theresa May claimed would be used to help rough sleepers.

Harle added: “Additional stamp duty for foreign investors is likely to be seen as a fair option because foreign nationals are classed as people who don’t pay tax in the UK.

“A concern would be whether the sentiment impacts the London property market, which is already struggling.

“Some may also claim that this kind of move signals we are not open to foreign business at just the time when we want to do the opposite. In reality, an increase is unlikely to dissuade wealthy foreign investors seeking these ‘safe haven’ assets.”

Harle mentioned an idea by think tank Onward, to removed capital gains tax for landlords selling to tenants who have lived there for over three years.

The thought process is that this might boost the supply of property and to help the tenants get their feet on the property ladder. The think tank has estimated that this could create an average saving of £15,000 which would then be split between the landlord and the tenant.

Harle said: “While this idea is well intentioned and could certainly be beneficial, it could also be abused.

“Depending on how the scheme was policed, unscrupulous landlords could higher their rents before selling to not only reap their half of the capital gains tax relief but also that of the renter.

“Similarly, you could see families circumnavigate capital gains tax by allowing relatives to rent for three years before selling them the house and saving on a fair chunk of tax.”