Nearly half of England could become a Help to Buy ISA no-go zone by spring 2017, due to the rising cost of average house prices meaning the ISA's thresholds will be exceeded in a vast number of areas.
The maximum property value eligible for a Help to Buy ISA stands at £250,000 outside London and £450,000 inside the capital. Research by eMoov has estimated that 46% of properties in England will be worth more than this by spring next year. Their investigation saw no indication that house prices in Scotland and Wales will rise above the threshold.
When the ISA product was introduced on 1 December last year, there were already 101 no-go districts around England (including 17 in London). This figure has risen by 28 in eight months, to stand at 129 in July. If house prices continue to rise at the same rate, eMoov predicts that 150 districts will be ineligible by March next year, which translates to 46% of districts in England, and a whopping 72% of districts in London, with only nine boroughs remaining viable options even with the higher London threshold.
Russell Quirk, founder and CEO of eMoov.co.uk, commented on the figures: "Historically, Help to Buy has been of little help to the nation's aspiring homeowners and it's plain to see why when you look at the numbers. Although you must at least appreciate the government's attempt at introducing a leg up through the ISA, the current pace of price growth across the market in England means that it will soon become irrelevant to the average buyer across nearly half of the country … If you do need help to get on the ladder but would prefer to choose where you live rather than have it dictated by the government, the only option is to look further north or across borders to Wales and Scotland."
There is a silver lining, however, in the fact that it was reported last month that house price growth is slowing down, largely thanks to the uncertainty following the Brexit vote. Since eMoov's prediction is based on projections from the past, reality may prove to be somewhat different, with more districts staying under the limit than currently expected.
Yet those with their Help to Buy ISA fund filled up and ready to buy a house in an area still under the limit may be looking at first-time buyer rates a little despondently. Even though mortgage rates are continuing to fall due to the cut to the Bank of England base rate, the 95% loan-to-value (LTV) tier has unfortunately been exempt from these reductions. What's worse, these first-time buyer deals have actually been seeing rate increases, with the only recent cut being to the number of products available.
This shows that it is still as important as ever to do your research to find the best deal possible, whether you are looking for a first-time buyer mortgage, a Help to Buy mortgage deal, or have enough saved up to be eligible for one of the regular lower-LTV fixed-rate mortgage products boasting record low rates. The increasing house prices may not be good news for those who have yet to buy a property, but once you're on the ladder you'd be happy to find them still on the rise.
If you've only just started saving up for your mortgage deposit, or are still busy saving up, be sure to keep an eye on average house prices in the area you are looking to buy a house in, to see how relevant your ISA savings still are to your homeowner aspirations.
Not sure what other restrictions may be placed on a Help to Buy ISA? Have a look at our guide to get a better idea.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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