1 December 2015 saw the launch of the new Help to Buy Isa (HTB Isa) as promised by George Osborne in his 2015 spring budget.
The new HTB Isa will operate in a similar way to the traditional cash Isa in that they will be both income and capital gains free. However the government will also ‘top-up’ savings by 25% when the saver is ready to purchase a property, thus enabling the first-time buyer to get their foot on the property ladder.
The government have pledged to give a maximum of £3,000 (when you have saved £12,000) and the minimum it will add is £400 (requiring savings of £1,600). Your appointed solicitor will apply for the bonus on your behalf.
Some banks have already disclosed details of their news HTB Isa products: Halifax will offer 4% and Nationwide and NatWest are offering 2%.
In order to qualify for the product, you must be a UK resident, a first time buyer and you cannot have owned property anywhere in the world. The property must be financed with a mortgage and it must be for residential use only. The maximum purchase price is £250,000 or £450,000 if you are buying in London.
If you already have a cash Isa, you will need to close it as you can only open one cash Isa in any one tax year. In the first calendar month, you may transfer up to £1,200 and £200 thereafter.
The HTB Isa is the latest move from the government to help young people tackle the housing crisis. The existing Help to Buy scheme ‘NewBuy’ provides a 95% mortgage if you buy a new-build property. In addition, the government offers shared ownership, equity loans and mortgage guarantees.
It will be interesting to see how these schemes affect the property market in years to come. Property prices in London and the South East are on the rise again after a brief slow down earlier in the year.
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