Calls for auto-enrolment scheme to fund mortgage deposits
An independent, cross-party, think tank has called for auto-enrolment to help first time buyers save for deposits.
Under the proposals, staff would be able to auto-enrol into a Lifetime ISA (LISA) through their employer, to help fund mortgage deposits.
A LISA lets first-time buyers save up to £4,000 tax-free each year. In addition, the Government pays a 25% bonus on contributions and the money saved can be put towards any home worth up to £450,000.
Research by Localis found that 58% of those who don’t own property are saving nothing towards a deposit to buy a future home. However, the think tank argues that by giving 18- to 40-year olds the option to enrol into a LISA, deposit saving would become more attractive.
Head of Research at Localis, Jack Airey, said: “Whether out of choice, or simply because they do not have enough money at the end of each month to do so, a majority of people are not building any financial capacity with which to get a mortgage and purchase a home in the future.”
Tackling this, the report by Localis asserted that: “One of the most important steps Government can take to save the home-owning democracy is reforming the ways in which people can save for a mortgage deposit. The current laissez-faire approach is simply not working.
“Government, therefore should make deposit saving a more attractive option. The auto-enrolment of employees aged 18-40 to pension schemes by employers should include the option to make contributions towards a LISA.
“Employers should be expected to make contributions equal to 3% of the employee’s qualifying salary and, as with the LISA, Government should continue to match 25% of employee contributions.
“This would revolutionise the way by which deposits are saved for.”
The research also recommends giving local authorities discretion to re-designate greenbelt land to allow some of it to be released for new homes. It also calls for government investment in new housing factories to help “produce a generation of new modular homes”.