Hints have been dropped that in the soon-to-be-made Autumn Statement the Treasury may announce plans to extend the mortgage guarantee scheme to support first-time buyers.
Mortgage Advice Bureau deputy CEO Ben Thompson points out that it’s been a really challenging time for first time buyers to get the keys in their hands. Economic volatility has seen potential buyers battle high inflation, pushing prices up and limiting the amount they can save.
Meanwhile, the higher interest rate environment has lowered the amount they can borrow, meaning bigger deposits are needed.
“The government is right to look at support for those taking their first steps on the property market in the upcoming Autumn Statement, but extending the mortgage guarantee scheme is just one possible route”.
“Other options on the table are a review of ISA products to support saving, or reforms to the existing products that savers are utilising”.
Hargreaves Lansdown head of personal finance Sarah Coles argues that a shift in the LISA price cap would be incredibly welcome.
“Runaway house price rises over the past five years have rendered the £450,000 limit much less generous than it was back in 2018. While you can still stretch to the average UK property – costing £291,000, Londoners would find the average home well out of reach, at £536,000″.
Coles continues:“If you want to buy somewhere more expensive, you’re hit with a punitive 25% penalty – eating into your deposit at a time when you can least afford it. Pushing up the limit, and ensuring it keeps pace with house prices in future, would be eminently sensible. It should go hand-in-hand with a cut to the penalty to 20% – so essentially all you’d lose if you bust the budget would be the government bonus”.
More rumours of yet another ISA are a concern to Coles. “ If the plan is to simplify and streamline the range, adding more different types of ISA risks bringing another layer of complexity. The LISA has helped over 171,000 people onto the property ladder, supporting deposits of £2bn.
She adds: “It has also helped hundreds of thousands start their savings and investment journey, forming habits which will help them build their resilience over the longer term. That’s not to be sniffed at. The Treasury doesn’t need to throw the baby out with the bathwater. Some tweaks to the LISA will give a huge head start to anyone saving for a property or for retirement.”
