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Budget 2015: Help-to-buy ISA could 'distort' housing market


03-21-2015

 

Institute for Fiscal Studies calls George Osborne's ISA, which was announced in the Budget, a 'dubious policy'

George Osborne’s pledge to help first-time buyers through a new “Help-to-buy” ISA is a “dubious policy” that could push up house prices, a think-tank has warned
The Treasury estimated that around 285,000 first-time buyers will use the scheme every year Photo: Alamy
 
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George Osborne’s pledge to help first-time buyers through a new “Help-to-buy” ISA is a “dubious policy” that could push up house prices, a think-tank has warned.

However, the Institute for Fiscal Studies (IFS) warned that the policy could add further “distortions” to a market that was already suffering from severe supply constraints.

The Government already runs various Help to Buy schemes, which help people onto and up the property ladder, but this is the first to be linked to an individual savings account or ISA.

The Treasury estimated that around 285,000 first-time buyers will use the scheme every year.

Under the new plans, first-time buyers can save up to £200 a month towards their home and the Government will boost their savings by a further 25pc.

Region Average FTB Deposit Average FTB Income Deposit as a % of income Max £15k ISA as a % of current deposit (ie incl govt £3k) Max £3k Government Contribution as a % of deposit
Northern Ireland £14,567 £27,900 52% 103% 21%
Northern SSR £16,359 £31,102 53% 92% 18%
Yorkshire and Humberside SSR £17,470 £31,468 56% 86% 17%
Wales £17,646 £31,144 57% 85% 17%
North West SSR £18,000 £32,124 56% 83% 17%
East Midlands SSR £18,721 £32,459 58% 80% 16%
West Midlands SSR £19,810 £32,963 60% 76% 15%
Scotland £20,075 £32,607 62% 75% 15%
East Anglia SSR £26,204 £36,038 73% 57% 11%
South West SSR £30,022 £36,860 81% 50% 10%
South East SSR £32,057 £43,973 73% 47% 9%
Greater London SSR £69,630 £55,539 125% 22% 4%

Someone trying to save a 10pc deposit on a new £150,000 home would only have to save £12,000, although this would take five years.

The Government would then contribute £3,000 more, taking the total deposit to £15,000.

“A lot of benefit in the policy will go to those who would have done that saving anyway,” said Stuart Adam, an economist at the IFS.

“There will be some people who will be persuaded to save more as a result of the policy, but certainly those who will find it easiest to qualify for the maximum top-up [of £50 a month] are those who have the money anyway or have wealthy parents."

Mr Adam also criticised the Government’s “sclerotic” system of planning reforms.

“Ultimately, what will make housing more affordable is building more houses.

“If policymakers are genuinely worried about housing affordability, then they need to focus more on that. They have been making more noises on planning and reforms, but it is very sclerotic, and on top of that the government itself isn’t building houses in a way that social housing was built in decades past.”

www.telegraph.co.uk/

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