The chancellor has announced a new Help to Buy ISA for first time buyers struggling to save a deposit on a new home.
For every £200 saved through the ISA, the government will “top it up” with £50, George Osborne revealed.
In his last Budget announcement before the general election, Mr Osborne said: “The Help to Buy ISA for first time buyers works like this.
“For every £200 you save for your deposit, the government will top it up with £50 more.
“It’s as simple as this – we’ll work hand-in-hand to help you buy your first home.
“This is a Budget that works for you.”
JLL head of residential research Adam Challis described the announcement as “woefully under-ambitious”.
Mr Challis said the government bonus, capped at a total of £3,000 on £12,000 of savings, would have a marginal effect on first time buyers, particularly those in London.
He said that the “idea and intention was good” but “the execution will make little difference for the average first time buyer, who has got four years to wait to receive a little bit of an extra boost - I don’t think it makes much of a difference to first time buyers or the market”.
London First head of housing Jonathan Seager said, while positive, the announcement failed to recognise the UK’s under supply of homes.
“It’s encouraging that the government is looking at affordability, which is clearly the biggest issue, but the way that you tackle that issue is by giving more supply not necessarily stoking up more demand,” he said.
“We know that demand exits and if this was announced with a huge drive to deliver more homes then you would think the pieces of the jigsaw were fitting better together than they are at the moment.”
Savers can put the money toward homes that are worth a maximum of £450,000 in London and £250,000 in all other areas of the UK.
But Pinsent Masons partner Iain Gilbey said, while “eye-catching”, the cap on the upper value limited will make it difficult for families to purchase properties in London and the South-east.
He added: “It will help those who have the ability to redirect up to £12,000 of their income into savings but whether that helps everyone on the ladder, I don’t know.”
- Only available for first time buyers
- Government gives £50 for every £200 saved
- A monthly maximum saving limit of £200
- Government bonus will be capped at a total of £3,000 on £12,000 of savings
- Opportunity to deposit an additional £1,000 when the account is first opened
- No limit on how long the account can remain open
The scheme will be available from Autumn 2015.