Critics line up to take aim at new home Isas
Fri 20 Mar 2015
The new Isa for first-time buyers is unlikely to solve the housing crisis - and could even worsen the property price 'bubble', economic experts warned yesterday.
The Help to Buy Isa was announced by the Chancellor in Wednesday's budget, delighting thousands of young buyers struggling to save for a deposit.
Under the plans, the Government will boost people's savings by 50 for every 200 they put away, with a maximum bonus of 3,000. And couples can have separate Isas, meaning they can receive a 6,000 bonus towards their first home.
The policy has been welcomed by mortgage brokers, who believe it could inject some life into a slowing property market.
But the institute for Fiscal Studies and two leading free market think-tanks yesterday warned that the scheme could backfire. They said it would only fuel demand without addressing the severe lack of new homes across the UK.
IFS economist Stuart Adam said those who would find it easiest to take up the offer were people already able to afford a deposit.
'This is a rather dubious policy intended to help first-time buyers which is more than likely to have the effect of inflating housing prices.' he said.
'A lot of the benefit of the policy will go to people who would have done that saving anyway.'
The institute of Economic Affairs decribed the new Isa as 'hopeless' and said it offered short-term help while failing to tackle the affordability crisis. It also warned it could worsen the 'housing bubble' by driving up demand.
The TaxPayer's Alliance said the real problem was Briain's restrictive planning regulations' - an issue the Isa failed to tackle.
'This expensive policy will do nothing to address the housing shortage,' a spokesman said.
Jonathan Harris, of mortgage broker Anderson Harris, added: 'Yesterday's Budget anouncement about the Help to Buy Isa is a welcome boost for first time buyers. However we would like to see a greater emphasis on building more homes. There is a danger that giving first-time buyers assistance with a deposit will only push up property prices further.'
But Peter Rollings, of estate agents Marsh & Parsons, said the Isas, coupled with cheap mortgages rates, would 'up the ante in the housing market in the coming months'.
David Hollingworth, of brokers London & Country, added that the scheme would particularly help in areas where house prices had been 'outpacing the rate at which first-time buyers can save.'
The Help to Buy Isas will be offered by banks and building societies in the autumn. They can be opened only by first-time buyers, and while money canot be transferred straight from a relative's account, there is nothing to stop a relative transferring money into an account belonging to the buyer, who can then transfer it into their Isa.
The Treasury says it will not decide exacty how and when to pay the money until it has consulted with the industry. The bonus will be available on home purchases of up to 450,000 in London and up to 250,000 outside London.