Most first-time buyers don’t know when the Help to Buy ISA ends

First-time buyers are living in a time when it appears to be much harder to get that first step onto the property ladder than ever before. House prices have increased by a massive 554% in the last 30 years and the time it now takes so save for a deposit has also substantially increased.

According to Nationwide, a decade ago it would take the average first-time buyer in the UK less than five years to save a 10% deposit of £14,080. Contrast that with today when it takes on average six and a half years to save a 10% deposit of £18,480.

This is why many first-time buyers have turned to the government Help to Buy ISA – launched over three years ago, the Help to Buy: ISA offers first-time buyers the opportunity to save up to £200 a month with the government topping up their contributions by 25%, up to a maximum of £3,000.

But… many first-time buyers aren’t aware of the scheme’s details. Almost two thirds of prospective first-time buyers are unaware of the cut-off date for the Help to Buy ISA, research by specialist bank Aldermore has found.

The deadline to open a government Help to Buy ISA is 30 November this year but contributions can still be made until November 2029, and the cut-off date to claim the bonus is 1st December 2030 – so there’s still time for your loved ones to open an account and start claiming their 25% bonus for their first home.

Over four fifths of potential first-time buyers don’t know what the minimum government bonus is either, while 80% don’t know what the maximum is. There is also a lack of understanding about the scheme from parents too.

Almost nine in 10 parents of first-time buyers are unsure what the minimum government bonus is, while a similar proportion are unsure what the maximum bonus is. But, when the parents were given an explanation of what the Help to Buy ISA is, 86% said they would encourage their child to save into a Help to Buy ISA.

So, with only six months to go, if you or your loved ones would like to discuss the Help to Buy ISA so that they can start boosting their savings for when they’re looking to buy a home in the next three, five or even ten years, you should seek professional advice today.

British first-time buyers struggle with mortgage jargon

Buying your first home. What an exciting time in your life! It’s the start of a new chapter, but it doesn’t come without its struggles. Getting a mortgage can be hard enough, but add in the technical jargon and it can become the first-time buyers Mount Everest. 

Data released by Aldermore highlights the fact that many first-time buyers don’t understand mortgage terminology, and could be missing out on schemes that are designed to help them.

But what terms do people struggle with and what do they actually mean?
Slightly over half of respondents weren’t aware of the ‘Help to Buy equity loan’ – this is where the government lends you up to 20% of the cost of your newly built home, interest free for the first five years, so you’ll only need a 5% deposit and a 75% mortgage to make up the rest!

Just under half didn’t understand what a ‘lifetime ISA’ was and slightly over one third didn’t know what a ‘Help-to-Buy ISA’ was. These ISAs allow first-time buyers to get a 25% government bonus on their savings for a first home, each with different rules which is why seeking professional advice is worthwhile.

35% of respondents also didn’t understand ‘shared ownership’ – where first-time buyers own a share on their home and pay rent at a reduced rate on the remaining share.

These figures suggest that many first-time-buyers could be missing out on various benefits and pathways that these schemes can provide for those wishing to enter the property market, which is why obtaining professional advice can be invaluable.

Your adviser will be able to help you understand these terms and explain the benefits of the different schemes.

If you or your loved ones want to discuss the options available to you, or talk through any of the schemes in more detail, contact us today.

Are Your Savings Under Performing?

The past few years have been appalling for savers with pitiful interest rates offered Jars of moneyon standard savings accounts. Now the uncertainty over Brexit has led to many experts saying the Bank of England won’t raise savings rates until 2020 at the earliest and the next move could even be lower.

Recently the Financial Conduct Authority named and shamed 32 banks and building societies that are paying customers as little as 0.1% interest on their savings. This is often on accounts that offered a competitive headline rate, but after a period of time the rate is cut to next to nothing. There are a lot of accounts out there that are paying you virtually no interest at all, but that doesn’t mean you have to settle for meagre returns on your savings. There are a number of ways you can vastly increase your interest rate.

The first thing to do is check all your savings accounts, and find out exactly what interest rate you are getting, and if there is any penalty for moving your savings elsewhere. Anyone with an ISA that is paying a poor rate should look at transferring to a new ISA with a better rate of interest.  You could also move your money into a stocks and shares ISA and invest in shares, bonds, or funds.

Alternatively, you could transfer some of your ISA savings into an Innovative Finance ISA. These allow you to invest your money into peer-to-peer lending, which offers far higher interest rates. There is more risk here, your money is being lent to individuals who could fail to repay, but as yet no-one in the UK has lost money in peer-to-peer and it has been running for over a decade. Also, your money isn’t covered by the Financial Services Compensation Scheme, so if the peer-to-peer lender went bust you could lose your cash.

If you are not sure where is best to invest your savings, then contact one of our Independent Financial Advisers to discuss your options.

Cash ISA v Stocks & Shares ISA

The type of ISA that’s right for you will usually depend on how long you want to invest for and what your attitude to investment risk is like.

A cash ISA is better suited to short term investments (less than 5 years) with little to no risk. Interest is added to your savings each year based on a fixed or tracker variable rate. Variable interest rate ISA’s usually offer instant access to your savings, while you could lose your interest if you withdraw the funds early from a fixed account.

A stocks & shares ISA is better suited to longer term investments of longer than 5 years. Savers have the choice of a wide range of investments such as funds, trusts, bonds and shares. The value of your ISA can both rise and fall depending on the performance of the investments. You can usually have access to your funds within 8-10 days.

The ISA limit for 2016/2017 is £15,240, and can be split between both types of ISA.

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Is a Stocks and Shares ISA right for you?

If you’re not sure that a Stocks and Shares ISA is the right investment for you then contact an Independent Financial Adviser at Warren & Co

Saving for your first home? Find out how to get an extra £3,000 with the Help to Buy: ISA

Help To Buy ISA

Help to Buy ISA’s are a tax free account, designed to help First Time Buyer’s save a deposit for their first home. You can pay in up to £1,200 in the first month, followed by £200 per month thereafter. Once you have saved a minimum of £1,600, you are then eligible for a bonus from the government of 25% of your savings. This means that for every £200 you pay in, the government will add £50 to the deposit.

This bonus is capped at a maximum of £3,000 per person, however if 2 people are buying together, they can both open their own ISA’s and so benefit from two bonuses.

To get the full £3,000 bonus, you would need to pay in a total of £12,000 across 5 years. When you are ready to buy the property, the solicitor will request the bonus from the government, to add to the savings you already have.

ISA’s: Annual Subscription Limits

SavingsThe government will be maintaining the ISA, Junior ISA and Child Trust Fund annual subscription limits at their current level for 2016-17.

The ISA annual allowance will be kept at £15,240. The Junior ISA and Child Trust Fund allowances will be kept at £4,080.