Help to Buy

The biggest macro implication of the Budget was the chancellor’s decision to ease the squeeze on public spending, a mostly political move to neutralise Labour’s best attack line on the Conservative party — that it doesn’t care about ordinary people.

But there are of course some interesting micro policies, not least the announcement of a “Help to Buy ISA” targeting people saving to buy their first home. The diagram below outlines how the policy is supposed to work. Savers can deposit up to £200 per month into a Help to Buy ISA, which the government will match with 25p for every £1 up to the total government contribution of £3,000. In other words, savers can deposit up to £12,000 and earn a maximum “bonus” taking it up to £15,000. (This doesn’t take into account any possible interest earned on the amount saved.)

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David Cameron announced the figures in the Sun, which shows a picture of him next to a snap of Margaret Thatcher promoting her Right to Buy scheme. It should not take too long to figure out the prime minister’s preferred interpretation of the first figures relating to the mortgage guarantee scheme: the only bubble Help to Buy is inflating is one of happiness in the hearts of ordinary people. Read more

A chart from Savills suggests that those using Help to Buy to purchase their first home will be quite different in the south of the UK from in the north. In the south, the beneficiaries may well end up being income rich, deposit poor. That is unless the lower end of the London property market has been distorted by high loan-to-value mortgages and Help to Buy opens it up. David Cameron tweeted today that the scheme will help many people on an “average wage” but I suspect most of them will be found outside the capital.  Read more

It says here that London prices are rising 10 times as fast as those in the rest of the country. It doesn’t sound like there is a great need for Help to Buy where you are.

Is that in the FT? I only read its House and Home section. Read more