Latest UK Help to Buy Failure ‘A Slap in the Face’
Government Loophole Leaves Many Short-Changed
Young people trying to get onto the housing ladder have been left thousands of pounds short of their house deposit because of a Government loophole in the Help to Buy Isa.
Under the scheme, home buyers can use a 25% Government bonus worth up to £3,000 to add to their deposit to buy a property. But this bonus can only be used on purchases worth up to £250,000, or £450,000 in London.
Many first-time-buyers joining shared ownership schemes thought they would be able to use their Isa bonuses as their shares were worth less than this threshold.
However, most have been shocked to find – often at the very last minute – that the Help to Buy Isa bonus threshold is for the entire value of the property, and not just their smaller share, a rule revealed by The Telegraph newspaper last week.
The Government is refusing to clarify the wording on its website, which experts say is causing confusion.
In some places it refers to a limit on the “cost” of a property – a term which could be misleading as it can mean the amount the buyer pays for the property.
Other parts of the guidance refer to the “consideration” paid by a buyer, which can be interpreted to mean the smaller share bought in a shared ownership scheme.
In the case of shared ownership, the “value” of a property is significantly higher than the “cost” of the buyer’s share of that property, because buyers pay for a portion – typically around 50%.
Earlier this week, a study by online estate agent emoov.com found that average properties in 46% of English local authorities will be too expensive to use the Help to Buy Isa by March next year.
Many first-time buyers are being forced to take out emergency loans from friends and family or use overdrafts to make up the shortfalls.
The Government’s Help to Buy website still contains no specific information about shared ownership schemes, and neither does the longer “scheme rules” document.
Last month it was also revealed that the Isa bonuses cannot be used towards the initial deposit handed over upon exchange, which is normally worth around 10% of the purchase price.
Instead the bonuses can only be received on completion, leaving many first-time-buyers who were relying on the extra cash short of money.