Quarter of a million Help to Buy ISAs opened but effectiveness is questioned

A quarter of a million first time buyers, more than half of whom are aged 30 and under, have opened a Help to Buy: ISA since the Government’s landmark scheme launched on 1st December 2015, equivalent to 1 person opening an account every 30 seconds, or over 3,000 a day.

The first home buyers have also claimed their bonus according to the treasury. George Osborne said: “Last year I announced further help for first time buyers with the new Help to Buy: ISA and I’m delighted that a quarter of a million people have already taken advantage. It is all part of our plan to back working people who are doing the right thing and saving for their first home.”

However they could well be set to fail first time buyers because of “arbitrary” decisions on pricing according to one conveyancer.

David Pett of MJP Conveyancing says that why there are significant upsides to the scheme for first time buyers, the drawbacks are potentially more significant.

According to David Pett, the limits placed on property prices eligible as well as the rate at which money can be saved could lead it to becoming something of a lame duck.

David Pett said: “A cash free bonus can only, on the surface, represent a good deal for a first time buyer, though limiting the amount of the monthly contribution and delaying for four and half years the opportunity to purchase a property with the full bonus, must beg the question whether the benefit of the bonus will be lost given the current rate of house inflation.

“On the same note and given the figures are not house price index linked how many properties with a property tag of £250,000 and less will be available in four and half years’ time?

“Applying an arbitrary cap to the extra-legal fee a conveyancer can charge, without any apparent engagement with the industry and regard to the amount of extra work involved, is unlikely to win favours and could lead to clients finding it difficult to find a conveyancer willing to assist with a purchase.”

Perhaps worse for Conveyancers is how the scheme is administered.

David continued: “Once registered the conveyancer for his or her £50 will be required to do the following.

“Firstly to make the bonus application on behalf of the client, and confirm that the client has declared their eligibility and the property being purchased meets the eligibility criteria.

“This involves sending an application for the bonus to the Administrator, submitting the relevant documentation to the Administrator, submitting a payment request following approval, and holding the bonus to apply to the purchase of the property.

“The conveyancer is also required to verify that the client is acquiring an eligible interest in land, that the acquisition is funded by a non-buy-to-let mortgage (unless exceptions apply) and that the value of the property is up to £250,000 or £450,000 depending on the location of that property.

“If the conveyancer has reason to believe that the client is not eligible for a bonus, he or she should not proceed with the bonus application.” David estimates that while difficult to tell, the cost of administering the scheme is likely to be higher, by up to £75 more than the £50 plus VAT chargeable per transaction.”

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