A government scheme to support first-time buyers has been blasted by political rivals because a so-called “top-up” on savings cannot be used towards the deposit on a new home
Revealed in the pre-election 2015 Budget, the Help to Buy ISA provided a government boost to savings at a rate of 25 per cent.
So a saver paying in £200 would receive an additional £50 towards the cost of buying a home.
Announcing the scheme in his Budget speech, chancellor George Osborne said: “We’ll work hand in hand to help you buy your first home. This is a Budget that works for you.
“A 10% deposit on the average first home costs £15,000, so if you put in up to £12,000 – we’ll put in up to £3,000 more.”
However, last week, the Treasury moved to update government websites to clarify the applications of the government top-up, making clauses stating that it cannot be used at the time of paying a deposit more prominent, and clarifying that savers only receive the additional support on completion of their purchase.
The government estimates that roughly 500,000 savers have been helped by the scheme.
“It has always been the case that money saved in a Help to Buy ISA is for an exchange deposit, with the bonus of up to £3,000 per ISA from the government going towards the total funds available for the property transaction” a Treasury spokeswoman said.
“The government has published clear guidance and the industry is fully aware that the bonus is only paid on completion.”
They added government support would still be considered by mortgage lenders, but Labour and the Lib Dems argue the government attempted to deceive savers on the merits of the scheme.
Shadow chief Treasury secretary Rebecca Long-Bailey said: “Once again the Tories are failing generation rent with empty promises.
“It is typical of the Tories to design a scheme that doesn’t help working people get on the housing ladder but instead only provides a little perk to those that can already afford it. ”
Lib Dem leader Tim Farron added: “The Conservatives are failing to address Britain’s housing crisis, either by increasing the supply of homes or their affordability.”
Hargreaves Lansdown head of financial planning Danny Cox told the Telegraph that ISA providers should make it clear the bonus will not be available at exchange.
“Hundreds of thousands of Help to Buy Isa savers risk finding a last-minute hole in their finances,” Cox said.