An investigation by the BBC has found many prospective homeowners are being priced out of using the government’s Help to Buy ISA scheme, with only a “lucky few” able to buy a house that doesn’t exceed the purchase cap.
The Help to Buy ISA scheme helps first-time buyers save up a deposit to buy their first home, but the scheme can only be used if the house price is less than the £250,000 price cap, or £450,000 for London.
However, the average starter home price is more than these maximum values in many areas. The BBC analysts looked at average asking prices for properties in approximately 1,000 local areas – using the property website Zoopla – and found that the cost of two-bedroom homes exceeds £250,000 in 28 per cent of areas (outside of London).
In London, average asking prices exceed the price cap in 65 per cent of areas. For the South East, it is 67 per cent, while it is 53 per cent in the East and 61 per cent in the South.
This is in stark contrast to the Midlands, Yorkshire, Lincolnshire and North East, where less than 5 per cent of areas have average asking prices exceeding the government’s price cap.
“Soaring housing costs have left millions of people stuck in a rent trap and struggling to save anything towards a home of their own,” said Campbell Robb, chief executive of Shelter, a housing charity.
“The Help to Buy ISA only helps the lucky few who are better off, or able to live with their parents while they save for a deposit. For the vast majority of renters who want to move forward in life and put down roots, this scheme brings them no closer to that dream.
“If the government genuinely wants to help the nation’s renters get a foot on the housing ladder, it needs to look beyond quick-fix schemes, and invest in homes that people on ordinary incomes can actually afford.”
A lack of affordable housing is a significant reason many people find it virtually impossible to get onto the property ladder. Richard Donnell, of Hometrack, said: “In order to appeal to a wider group of buyers, builders need to start building smaller houses to offer at the lower price point to help first-time buyers get on the housing ladder.
“There is a lack of supply of two-bedroom homes and this keeps the price gap narrow and relatively close to three-bedroom home prices.”
Despite not everyone being able to take full advantage of the Help to Buy ISA, Martin Lewis of MoneySavingExpert.com highlighted that signing up can still carry benefits.
He said: “It is a cash giveaway from the taxpayer. Even if you don’t end up using it to buy a house, you still have savings with a very favourable rate of interest.”