Last dash: the Help to Buy Isa deadline is days away

Last dash: the Help to Buy Isa deadline is days away

First-time buyers have only a short time to grab a Help to Buy Isa before the scheme ends, but should they be considering a Lifetime Isa instead?

Kenza Bryan November 23 2019, 5:00pm, The Times

First-time buyers who want a Help to Buy Isa must open an account by next week or risk missing out. The closing of the government’s flagship saving scheme, designed to help people to save to buy their first home, could be a blow for younger people trying to get on to the property ladder.

Santander says that to open an account by the deadline on November 30 its customers need to put in an application online or in branch and receive confirmation that the application has been successful on Thursday. Clydesdale Bank said it will also stop accepting new applications on Thursday.

An application should not take long to process — you could request an account on Thursday morning and have it confirmed in the afternoon — but if a bank raises queries to comply with its regulatory obligations, the process could take days. To be sure of success you should apply as soon as possible. The Help to Buy Isa scheme offers a government bonus of 25 per cent of any money saved, up to a maximum of £3,000, with the total amount you can save capped at £12,000.

A quarter of a million homebuyers have received a total of £285 million in bonuses, yet this is only a fifth of the numbers the Treasury hoped would take up the perk.

A problem with the scheme is that the bonus is paid only after exchange of contracts, which means it cannot be used towards a home deposit, and this is often the biggest hurdle for first-time buyers. Many people put the money towards solicitors’ fees instead.

The scheme has also been accused of artificially inflating house prices, ultimately making it harder to save for a deposit. Yet UK Finance, a trade association, suggests that this isn’t the case. There were 370,000 first-time buyer loans in the UK in 2018, compared with 297,520 in 2015, when the scheme launched. It has also helped some buyers to get on the housing ladder more quickly — the average age of homebuyers purchasing through the scheme is 28, compared with 30 for the market as a whole. At the start of the year the average value of a house bought using the Isa was £173,470, lower than the average first-time buyer price of £190,999.

At midnight on November 30 applications for the Isa will not be accepted by any provider, and the only government homeownership saving scheme will be the Lifetime Isa (Lisa).

This is a tax-free savings account into which you can save £4,000 a year up to age 50, to which the government will add a 25 per cent bonus, paid each month, up to a maximum of £1,000 a year. The scheme is open to anyone aged 18 to 39 and is designed for first-time buyers purchasing a home valued up to £450,000, or for people saving for retirement.

A problem with the Lisa is the penalty for early withdrawal, which is 25 per cent of your total savings. If you put £1,000 into a Lisa and receive an annual £250 bonus, but need to withdraw some money, you would lose a quarter of your £1,250 savings, which is £312.50. But you keep £937.50 of the original £1,000, which means you only lose 6.25 per cent of your original investment.

HMRC collected more than £1 million in these penalties, averaging £695 per fine, between April 2017 and April 2019.

Which one should I go for?
It depends how you want to use the money. If you aren’t entirely sure, the Help to Buy Isa, which does not charge a penalty, might be best. You have to save a minimum of £1,600 in the scheme before you can claim the bonus. After you have saved £12,000 you stop receiving a bonus. With the Lisa there is no minimum before receiving a bonus, and you can save £4,000 a year as long as the scheme is available.

The Help to Buy Isa rates are higher, but the Lisa bonus is greater and ultimately could make you more money, despite its lower rates.

Andrew Hagger, the founder of Moneyfacts, a financial advice website, suggests that savers can have the best of both worlds by taking out a Lisa and Help to Buy Isa, although you will receive only one of the government bonuses.

Another option is a Help to Buy equity loan scheme under which the government will lend you up to 20 per cent (40 per cent in London) of the value of a new-build home interest-free for five years if you have a 5 per cent deposit. The scheme is open until 2021.

Which bank has the best deal?

About 27 banks and building societies offer a Help to Buy Isa and the best interest rate is 2.58 per cent from Barclays. Its branches will process applications up to closing time on November 30, but existing customers can open an account on the phone up to 9pm or online until 10pm. Most companies will accept applications until November 30, except for Santander and Clydesdale.

There are five cash Lisas available. The two best rates are from Oak North Bank, in conjunction with the Moneybox savings app, at 1.4 per cent, and Nottingham Building Society at 1.25 per cent.
What happens after next Saturday?

Existing account holders can keep saving into their account until December 1, 2030. You can have as many Isas as you want, but can only pay into one cash Isa each tax year up to a maximum of £20,000. Help to Buy Isas offer better rates than ordinary cash Isas. The best easy access cash Isa is the Ford Money Flexible Cash which offers 1.27 per cent, while the Virgin Money’s double take Isa offers 1.36 per cent but allows only two withdrawals. If you fix for three years you can get 1.76 per cent with Hinckley and Rugby Building Society.

CASE STUDIES
‘Help to Buy was just right for me’
Alec Lawrence, 22, works for a London mortgage company. He was promoted this year and the salary boost has allowed him to open a savings account for the first time.

Two weeks ago, after a little bit of encouragement from his mother, he decided to take out a Help to Buy Isa with HSBC, earning 2.25 per cent interest on the money he saves each month.

“Maybe it’s Mum’s way of suggesting that I should leave her house,” Alec says. “I still enjoy living at home, but this is preparation for moving out in the future.”

Alec can expect to earn a £600 boost from the government if he pays in £200 a month for a year and then uses this to buy a first home worth less than £250,000, or £450,000 if it is in London. The government adds 25 per cent to your savings and allows you to put in £1,200 in your first month then £200 a month after that. The maximum government bonus available over the course of the scheme is £3,000, for which you have to have saved £12,000.

The scheme works well for Alex because £200 is about the amount he has to spare each month He spends most of his salary on commuting to London from Hertfordshire, going out with friends at the weekend and supporting West Ham United.

Hannah Wright: ‘The Lisa offers free money’
‘The Lifetime Isa is for me’

Hannah Wright, 26, says she is the only one in her circle of friends who does not expect to lean on the bank of Mum and Dad to buy her first home.

She is striving to save at least £15,000 over the next few years to put down a deposit on a small house in Surrey, where she now lives with her mother.

In April 2017 Hannah, who earns £34,000 a year on the graduate scheme at the Department for Transport, decided to boost her savings by opening a Lifetime Isa, which pays a 25 per cent government bonus on anything she saves if she uses the money for a first home or in retirement.

She chose the Lisa over the Help to Buy Isa scheme because of the potential to earn a bigger bonus. The maximum available through the Help to Buy Isa is £3,000, compared with £33,000 if you opened a Lisa at 18 and paid in the maximum amount up to the age of 50. Although Hannah could only afford to pay in £5 a month when she first opened her Lisa, she has since been able to increase her payments to £400 a month.

“I’m always banging on about Lisas, but few of my friends have them,” Hannah says. “I haven’t got a lot of money so I need to be careful about where I put it. The Lisa offers free money, so I don’t understand why anyone would choose not to have one.”

What will Brexit mean for house prices?

Expert house price predictions for before Brexit and beyond

By Ele Clark for Which 13 Nov 2019

Whether you’re a staunch remainer or avid Brexiteer, there’s no denying that the uncertainty around when the UK will leave the EU, and the terms under which it may happen, are causing property market jitters.

The upcoming general election – scheduled for 12 December – is doing nothing to calm nerves.

With each of the major political parties taking a different line on Brexit, it’s impossible to predict the potential knock-on effect for property prices and the sector as a whole in 2020 – but looking backwards at what’s happened so far can give some clues.

We’ve analysed market activity before and since the Brexit referendum and spoken to experts from the estate agency, building, mortgage and buy-to-let sectors to bring you the insider’s guide to what could happen over the coming months.

What could a base rate cut mean for the property market?

The economic uncertainty caused by Brexit has undoubtedly affected the market, with house prices falling in some areas and fewer sales having taken place so far this year compared to the same time last year.

To add to the confusion, a base rate cut is looking more likely following the most recent vote by the Monetary Policy Committee, in which two out of nine members voted for a decrease.

Question marks over what this could mean for mortgage rates are making decisions even tougher for those weighing up whether to move house or remortgage.

What will a no-deal Brexit mean for house prices?

While many MPs are strongly opposed to it, a no-deal Brexit remains the default position if an agreement cannot be reached between the UK and EU.

Many business leaders and financial experts have expressed concerns about the potential consequences of leaving without a deal.

Accountancy firm KPMG has predicted that house prices would fall by around 6% following a no-deal Brexit, but that they could drop by as much as 20% in a worst-case scenario.

In July, the Office for Budget Responsibility said that a no-deal Brexit could lead to house prices falling by almost 10% by mid-2021.

Looking further back, Bank of England Governor Mark Carney said in February that UK growth would be ‘guaranteed’ to fall in the event of a no-deal Brexit.

What’s happened to house prices since the Brexit vote?

House prices did stagnate for a while following the referendum in June 2016, as you’ll see in the chart below. However, it was fairly normal for that time of year: prices generally grow in spring and plateau over the following few months, a pattern that was repeated in 2017.

But, with Brexit looming ever closer, house prices fell much more sharply than usual after last summer.

The good news if you’re a homeowner is that prices have generally recovered over the last few months, with September 2019 (£234,370) only taking a slight dip against August, which saw the highest average house price on our chart at £234,853.

As you can see in the graph, it’s normal for prices to peak in August before falling slightly from September, so this indicates a return to a more usual seasonal pattern.

Are UK house prices falling?

Looking at year-on-year house price change over the longer term can be another useful way of understanding what the market’s doing.
The chart below shows what the annual rate of change has been each June since 2014, plus September 2019 (the most recent data available at time of publishing):

As you can see, the rate of house price growth plummeted in the year after the referendum everywhere in the UK except Scotland, which remained flat.

Two years on, in June 2018, year-on-year price growth had improved in every UK nation except England.

By June 2019, with Brexit supposedly fast approaching, the rate of growth had slowed across the board to a UK average of 1.01%. However, by September this had picked up slightly to 1.26% despite the fact that, at that point, Boris Johnson was promising that Brexit would take place on 31 October.

This shows how difficult it is to draw a direct link between Brexit and house price activity: it’s impossible to accurately state the extent to which Brexit has influenced the figures. And some argue that the house-price slowdown is simply a long-overdue market correction, which could help the thousands of potential first-time buyers who’ve been priced out in recent years.

Transaction volumes since the referendum

Another way of judging the health of the housing market is to look at transaction volumes, meaning the number of property sales in any given month. A lower number of sales can indicate market uncertainty, which is often triggered by events such as an election or referendum.

Interestingly, the referendum itself didn’t seem to have much impact on transaction figures.

Earlier this year, however, transactions were quite sharply down compared to the same months in 2018. But activity has improved recently, with September showing a slight uptick in sales (101,740) compared to 2018 (99,420).

It remains to be seen whether transactions will decrease again in the run-up to the general election – data wasn’t yet available at the time of publishing this article.

(The spike you can see in the graph below was caused by investors rushing to complete their purchases before the 3% buy-to-let stamp duty surcharge came into force in April 2016.)

Source: HMRC UK Property Transaction Statistics, released 22 October 2019. UK figures are seasonally adjusted; individual nations are not. Figures represent all residential property transactions of £40,000 or above.

What’s the pre-Brexit market like for sellers?

Two commonly used measures of how the market is performing for sellers are stock per branch – which is the average number of properties on each estate agency’s books – and time to sell.

The chart below shows that it’s taken people longer to sell their homes recently than in previous years. In January, the average time for a property to go under offer shot up to 77 days, the highest on record.

It has since fallen, dropping to 62 days in June and remaining at that level ever since, but that’s still much slower than in previous years. Many commentators believe this is due to nervousness around buying a home in the run-up to the election and a potential Brexit.

Stock per branch is only slightly up year-on-year, from 52 in September 2018 to 54 in September 2019.

This could be indicative of seller frustration, with a July 2019 report from data agency TwentyCi pointing to 895,000 homes having been withdrawn from the market over the previous year.

Brexit house price predictions: what do the experts think?

The charts above show us what’s already happened, but what lies ahead? We spoke to a range of industry experts to find out what they believe the future holds for the UK property market, both before Brexit and beyond. Here’s what they said.

The mortgage broker: ‘Don’t just jump into a fixed rate’

David Blake, Which? Mortgage expert, says: ‘The political situation may be in turmoil but it’s important that buyers and homeowners don’t panic or make any rash decisions.

‘I’m sure many people are waiting until we know more about whether the UK will leave with a deal, but it’s tough putting your life on hold for an unknown.

‘Recent price drops in some regions mean that it’s becoming more of a buyers’ market, so you might be able to get a good deal. Besides, buying a property should generally be regarded as a long-term investment and, even if there is a short-term price drop, house prices will probably stabilise in the future.

‘Mortgage rates are incredibly low right now and many will want to fix into a low rate to give themselves security as we move into a period of uncertainty. But don’t just jump into a fixed rate without considering the alternatives – there are plenty of flexible products that would leave your options to remortgage open if rates did start to change.

‘Brexit is still a complete unknown, and while a professional mortgage adviser won’t have all the answers, they will be able to explain your mortgage options to help you navigate this period of uncertainty.’

The property pundit: ‘If you want to live there long term, buy now’

Kate Faulkner, housing expert and founder of propertychecklists.co.uk, says: ‘we’ve definitely seen a stagnation in the market over the last year in areas such as London, the South and East (which had all overheated), and this has spread to other areas over the last few months.

‘Buyers have held back in the hope that prices will fall, but as this hasn’t materialised across the board, they’re starting to come back into the market.

‘The difficulty now is lack of properties for sale, as people are worried they won’t get a good price for their property. This has led to a flurry of activity in some areas during the summer, but I think this will slow down due to the uncertainty of “what happens next?”

‘Personally, I don’t think buyers should be put off by fears of a house price crash as long as they mitigate the risks. If you bought a property now, even if it did drop in value in the short term, the market would probably have corrected itself by the time you wanted to move (assuming you stayed there for at least five years).

‘However, if you’re considering buying somewhere for the short term it’s more complicated. Transactions are likely to stagnate towards the end of the year unless we see some clarity over Brexit. ‘In terms of buy-to-let, demand from landlords has already reduced and many have sold up.

We are now seeing rent rises as a result – particularly since the tenant fee ban – so sadly this has impacted tenants more than agents or landlords.

‘With property deals available and rents on the rise, now isn’t a bad time to be a landlord as long as you really understand your objectives and whether the deal stacks up both now and in the long run.’
The estate agent: ‘Buyers and sellers are putting their plans on hold’

Mark Hayward, chief executive, NAEA Propertymark says: ‘Brexit is undoubtedly causing uncertainty in the housing market, which in turn affects sentiment and decision-making, and we’re seeing both buyers and sellers put their plans on hold as a result.

‘Recent research from accountancy firm KPMG suggests UK house prices could fall by more than 5% if there’s a no-deal Brexit, which won’t help consumer confidence.

‘Once the current political impasse is resolved and it’s clear how and when we’ll be leaving the EU, we hope there will be a degree of certainty which may trigger a flurry of activity. We hope this certainty is provided sooner rather than later.’

The buy-to-let expert: ‘Portfolio landlords will fare well’

Chris Norris, director of policy and practice at the National Landlords Association (NLA), says: ‘The issues troubling most landlords are the status of non-UK, and in particular EU, citizens, given their responsibilities to police the Government’s Right to Rent policy, as well as the overall impact that divergence [Brexit] will have on the stability of the housing market.

‘It is still too early to predict what impact Brexit will have on property values. A weakening of the appeal of UK investment could drive prices down or a lack of certainty could drive up interest in the relative stability of bricks and mortar.

‘Likewise, while news of a general election on 12 December might be music to the ears of those that want Brexit done and dusted, the uncertainty is not yet over. And aside from Brexit, landlords are concerned about what the next government’s plans will be for the private rented sector more broadly. All factors together have caused landlord confidence to fall to an all-time low.

‘On a day-to-day level, changes to immigration policy could reduce demand from those coming to the UK, or drive up interest from those taking advantage of new arrangements with states outside the EU.

‘It is likely that landlords with established, well-capitalised portfolios will fare reasonably well. However, those heavily reliant on finance may find uncertain conditions more troubling.’

The housebuilder: ‘We need skilled labour from abroad’

Stewart Baseley, executive chairman of the Home Builders Federation, says: ‘Unlike the wider housing market, where transactions have dropped considerably from the historical norm, the new-build market has remained relatively strong in recent months – although there are some challenges at certain parts of the market and areas of the country.

‘The confirmation in the Budget of an extension to the Help to buy scheme was welcome. The scheme is ensuring demand for new-build homes remains strong [and]… the certainty of demand is enabling builders to plan ahead to increase output in the coming years, as is demonstrated by the record high number of planning permissions being granted.

‘To enable increases to be delivered the industry needs certainty about future labour supply. It is essential that, post-Brexit, the industry continues to be able to access skilled labour from abroad if housing targets are to be met.’

What will Brexit mean for interest rates?

What will Brexit mean for interest rates?

Find out how leaving the EU could affect savings and mortgage rates
By Ian Aikman for Which 7 Nov 2019

The Bank of England’s monetary policy committee (MPC) has held interest rates at 0.75% in its last meeting before the 12 December general election.The decision continues the 14-month-long streak of leaving interest rates unchanged. But for the first time since June 2018, it wasn’t taken unanimously.

At its latest meeting on 7 November, the Bank’s MPC voted 7-2 to keep interest rates at 0.75%. The two dissenters wanted to lower rates to 0.5%. Changes to interest rates can have far-reaching consequences, on everything from your personal finances to the wider economy. The Bank of England sets interest rates, also known as the base rate, in response to current events and expected economic performance, with the aim of keeping inflation around its 2% target.

In the past, holding rates has been described as a ‘wait-and-see’ approach to Brexit. But with the deadline looming ever-closer, the Bank might soon have to change course next year.
So what will it do, and what will its decision mean for you?

Why the Bank of England base rate matters

Sometimes known simply as the interest rate, the Bank of England base rate influences how much banks and other lenders charge you to borrow money, and how much interest is paid on your savings. In the case of a base rate rise, banks will tend to raise mortgage interest rates as well as loans, pushing up the cost of borrowing money. At the same time, interest rates on savings are also likely to increase, meaning your savings pot could grow a little faster.

Lowering the base rate could have the opposite effect, with mortgage rates becoming slightly cheaper, but savings deals offering lower returns.
After August’s growth figures revealed the UK economy shrank by 0.2% – the first contraction since 2012 – many in the City are called for a rates cut to increase spending and stimulate growth. The MPC did not bow to this pressure, and the base rate was kept the same in September.

Factors that influence the base rate

When setting interest rates, the MPC’s goal is to keep inflation as close to 2% as possible. Its decisions are informed by an inflation forecast, which takes into account:
• the current inflation level wage

• growth the cost of goods (including the impact of changes in the exchange rate)
• consumer spending
• investment levels

Interest rate decisions also consider unemployment rates and economic growth figures – the latter of which must not exceed a 1.5% ‘speed limit’ or inflation could rise above target.
The Bank of England puts it like this: ‘Overall, we know that if we lower interest rates, this tends to increase spending and if we raise rates this tends to reduce spending. So, to meet our inflation target, we need to judge how much people intend to save and spend given the current interest rates.’

Timeline: interest rates since the Brexit referendum

As Brexit looms on the horizon, you might wonder how this unprecedented political event might affect the economy.
While no one has a crystal ball, it can be helpful to look at what happened to the base rate during the past two years of Brexit votes and negotiations.

August 2016: Just over a month after the referendum on EU membership, the Bank of England cut the base rate in half – from 0.5% to 0.25%. This was the first time the interest rate had changed since March 2009.

Interest rates were already at a historic low before this reduction. In the wake of the 2008 financial crisis, the base rate fell dramatically from 5% to 0.5%, where it remained for almost a decade.
November 2017: the MPC restored the base rate to pre-referendum levels in order to combat rising inflation. The Bank linked this decision directly to Brexit, saying ‘the fall in the pound following the Brexit vote’ means that things from abroad cost more, ‘and that means higher prices in the shops’.

August 2018: The MPC raised interest rates from 0.5% to 0.75% – the first rise above 0.5% in almost a decade. This decision was based on the economy’s steady growth, and the accompanying report noted that most referendum-related price hikes appeared to have happened already.

March 2019: Just over a week before the UK’s original EU exit date of Friday 29 March, the MPC voted to keep interest rates at 0.75% once again, citing low unemployment and inflation almost exactly on target at 1.9%. Minutes from the group’s meeting did, however, discuss the negative effect Brexit could have on businesses.

November 2019: The MPC kept interest rates at 0.75%, with seven of nine members voting this way. The remaining two voted to cut the base rate to 0.5%, but they were overruled by the majority. This could be the first sign that a rates cut is on the way. Though there’s no guaranteeing that this is the case.

What decision-makers have said about post-Brexit interest rates?

The MPC tends to let is decisions do the talking, rarely revealing what those might be ahead of time. So far, it has taken a ‘wait and see’ approach to Brexit, meaning we might not see any base rate changes until after we leave the EU.
Still, key decision-makers have hinted at what form post-Brexit monetary policy could take:

Mark Carney, governor of the Bank of England

Since the referendum, Carney has been adamant that interest rates could go up or down after Brexit, depending on the circumstances. This was summed up when he said ‘it’s not automatic which way policy would go in the event of a hard Brexit’ at January’s World Economic Forum.
However, at the end of June, he told the Commons Treasury committee that a no-deal Brexit could likely lead the Bank to cut rates.

Gertjan Vlieghe, MPC member

Speaking to the Treasury Select Committee late in February, Vlieghe went slightly further than Carney, saying ‘just because [interest rates] could go in either direction, doesn’t mean that each one is equally likely’.
The rate-setter supported Carney’s point that any interest rate decisions will have to be made in real time, after the committee can see what impact Brexit has had.
Despite this, Vlieghe did outline how a likely fall in the pound’s value could lead to higher inflation, which would require the MPC to take action.
In mid-July he said a no-deal Brexit could see rates cut to almost zero: ‘I think it is more likely that I would move to cut Bank Rate towards the effective lower bound of close to 0% in the event of a no-deal scenario.’

The monetary policy committee (MPC)

In May’s inflation report, the MPC, which includes Vlieghe and Carney, said: ‘Whatever form Brexit takes, we will keep inflation low and support the economy.’
As we saw in 2017 and 2018, the MPC can opt to increase the base rate when they want to lower inflation. However, there will be other factors, such as a potential lack of consumer and business confidence that the Bank will have to contend with after Brexit.
Minutes from June’s MPC meeting said rates would gradually rise ‘were the economy to develop broadly in line with its May Inflation Report projections that included an assumption of a smooth Brexit.’ But the minutes also said that ‘domestically, the perceived likelihood of a no-deal Brexit has risen’.
In November’s decision, two MPC members voted against keeping the base rate at 0.75%, suggesting at least some members think it’s time for a change in tactics. If more members join the dissenters, we could see rates change soon.

What economists say about interest rates post-Brexit?

Rocio Concha, chief economist at Which?

‘It’s clear that the political uncertainty surrounding Brexit is preventing the Bank of England from raising rates beyond their current level. In the medium term though, the Bank’s intention is still to gradually increase rates closer to their pre-recessionary norms – but only if the UK’s departure from the EU goes smoothly.
In the event of a no-deal Brexit, we expect that the most likely response is for rates to fall in order to stimulate a weakened economy. But, as the Bank says, that is by no means certain. A fall in the value of the pound will undoubtedly lead to higher prices and the Bank may find itself in a difficult position, balancing economic stimulus with tackling inflation.’

Ben Brettell, senior economist at Hargreaves Lansdown

Brettell told Which? Money: ‘The Bank of England has been setting a neutral tone as Brexit approaches. The minutes of recent meetings reiterate that the MPC still sees the need for higher interest rates in the coming years, but a deteriorating global growth outlook and mounting Brexit uncertainty have put paid to any thoughts of tighter policy for now.
Where we go from here is highly uncertain, as we still have little clarity over what Brexit will look like, if and when it happens. An orderly Brexit could see the Bank refocus on wage growth and raise rates later this year. A no-deal scenario would likely see sterling fall 5-10%, causing a spike in inflation, but I’d expect the Bank to look through this and cut rates to support the economy.’

What can you do to prepare?
If the Bank of England base rate does change after Brexit, the key things that might be affected are your mortgage and your savings.

Savings
For savings, a base rate rise could see your account’s interest rate increase, giving you better returns. On the other hand, if the base rate is cut, you might see your interest fall.
Switching to a fixed-rate account will secure you against any potential Brexit turmoil, but you’ll miss out on the possible benefits of a base rate rise.
If you’re thinking of switching, you can compare hundreds of savings accounts at Which? Money Compare to find the best home for your nest egg.

Mortgages Variable-rate and tracker mortgage customers could face higher repayments if the base rate rises. If you’re worried about this, you could remortgage to a fixed-rate deal in order to secure cheaper repayments for a set period.

However, if the base rate is lower, variable rate borrowers may see their repayments become cheaper. You’ll miss out on this if you’re on a fixed rate.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which?

Money Compare is a trading name of Which? Financial Services Limited.
Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

Lisa takes centre stage as Help to Buy makes its exit

Lisa takes centre stage as Help to Buy makes its exit

November 10 2019, 12:01am,

The Sunday Times, Kate Palmer

First-time buyers will no longer be able to open a Help to Buy Isa after November 30

First-time homebuyers have days to grab the best deals on the market before Help to Buy Isas, which pay up to 2.55%, close for business.
Savers have until November 30 to open a Help to Buy Isa. The accounts, launched in 2015, pay a 25% government bonus on a house deposit. However, some providers are pulling their products even earlier.

The rates on offer now are far better than those on the replacement product, the Lifetime Isa (Lisa), of about 1.5%.
The top-paying Help to Buy Isa is from Barclays, at 2.55%. Nationwide pays 2.5%, NatWest 2.47% and Monmouthshire Building Society 2.35%. All these rates beat comparable easy-access cash Isas, which pay up to 1.45% (Virgin Money).

Santander’s Help to Buy Isa, which pays 1.75%, or 2.25% to those with a 123 current account, will stop opening new accounts from November 28.

Help to Buy Isas let savers deposit a £1,200 lump sum when the account is opened and then save £200 a month. When a home is bought, the state pays out a 25% boost.
It is possible to have both a Help to Buy and Lisa but only to use the government bonus from one towards a property.

A Lisa lets people aged 18-39 save up to £4,000 a year towards a first home and receive a 25% state bonus. It can be opened with as little as £1 — but only deposit money if you intend to use it for a first home or lock it away until age 60.

Taking out the cash in any other way carries a hefty 25% exit fee, as the 25% bonus is automatically paid each year. A saver who deposits the full £4,000 after a year would be left with just £3,802.50, assuming 1.4% interest.

It is possible to use the Help to Buy Isa to buy a property and keep saving in a Lisa until age 60, or use the bonus from a Lisa to buy a home and keep the Help to Buy Isa open as a tax-free regular savings account. Savers should calculate how much the bonus would be worth on each account.

Any deposits in either Isa count towards your annual £20,000 Isa allowance.

Experts hope that with the end of the Help to Buy Isa, competition will improve Lisa rates. The best, from savings app Moneybox, is now 1.40%.

Tomorrow, Unity Mutual, which offers a stocks and shares Lisa, will open its 1.5% Lisa to individuals with £1 or more to invest. The money is invested in Unity’s portfolio of rental properties, with the rate guaranteed until April.

Steve Code, insurance director at Unity Mutual, said: “Time is running out for anyone who wants to open a Help to Buy Isa, but the Lifetime is a great alternative, as you can save more each year and benefit from a larger potential bonus.”

But Andrew Hagger of Moneycomms warned: “A Lifetime Isa is a fairly long-term product. The question to ask with Unity is whether the guarantee is watertight, and what happens after next April?”

What the general election could mean for your finances

What the general election could mean for your finances

With a national vote set for December 12, we look at the policy pledges

David Byers, Carol Lewis, Mark Atherton and Martina Lees

November 2 2019, 12:01am, The Times

And they’re off. After numerous failed votes, weeks of political posturing and frayed tempers in parliament and the country, Britain is finally heading for a general election. The manifestos haven’t been published, but the Times Money team has scoured past announcements and proclamations to put together a guide to what we might reasonably expect.

INTEREST RATES
Conservatives
If the Tories win the election, the future of interest rates will depend on the type of Brexit we end up with. A no-deal Brexit will result in rate cuts by the Bank of England to stimulate a shocked economy. This would be bad news for savers, but good news for mortgage holders. However, if we depart with a deal, that may encourage the Bank of England to raise rates. The base rate has been 0.75 per cent since August last year and has not been above 1 per cent since February 2009.

Labour
The likelihood of a rate rise increases significantly if Jeremy Corbyn gets into power. “A Labour government is expected to borrow heavily because of its public spending commitments. This could lead to a sharp increase in interest rates,” says Anna Bowes of Savings Champion, a personal finance website.
Ray Boulger of John Charcol, a mortgage broker, agrees. “The plans of a Corbyn government to nationalise vast sections of the economy would inevitably result in an increase in government borrowing, the expectation of which would push up interest rates. Fears that Labour policies would create capital flight and a further fall in sterling would also contribute to interest rates rising. The cost of fixed-rate mortgages would increase very quickly,” he says.

Liberal Democrats
In the unlikely event that the Lib Dems win an overall majority to govern on their own, the first thing Jo Swinson said she would do as prime minister is revoke Article 50 and cancel Brexit. This scenario, according to the Institute for Fiscal Studies (IFS), a research group, would be “the best economic outcome” and interest rates would rise quickly. This would also be the case in a Labour-led coalition.

TAX
Conservatives
The prime minister Boris Johnson has previously talked about raising the threshold at which you start paying higher-rate income tax in England from £50,000 to £80,000. At present, 40 per cent tax is levied on income of between £50,000 and £150,000. Scotland and Wales set their own tax bands.
According to AJ Bell, an investment platform, this would affect about four million people, with the highest earners gaining an extra £2,500 a year.
Raising the threshold would not be all good news for higher-rate taxpayers, however, because they could lose tax reliefs on their pension savings.
Income tax isn’t the only tax earmarked for reform. The chancellor, Sajid Javid, suggested at the Conservative party conference that he was considering scrapping inheritance tax.
The Tories have also promised to look at the pension tax rules for higher earners, including the lifetime allowance (£1.055 million) and annual allowance (£40,000), after it emerged that NHS workers were cutting their hours to avoid tax. Another unpopular rule they could look at is the taper applied to the annual pension allowance, which reduces the tax-free amount that can be saved into a pension for those earning more than £150,000.

Labour
The shadow chancellor John McDonnell has proposed lowering the threshold at which the 45 per cent additional income tax rate kicks in from £150,000 to £80,000, and would apply a 50 per cent rate to income of more than £123,000. Labour’s 2017 manifesto included an “excessive pay levy” under which companies would have to pay 2.5 per cent tax on any salary they paid over £330,000 and 5 per cent on any wages above £500,000. Labour has previously indicated that it may reduce pension tax relief.
The party has pledged to scrap the existing complicated inheritance tax system and simply impose a lifetime cap of £125,000 on the amount you can inherit tax-free. Any gifts received above this would be taxed as income. The party has also said it would end the marriage allowance that reduces a couple’s tax liability by £250 a year. McDonnell has also said he would reverse the Conservative cuts to capital gains tax (CGT) from 28 per cent to 20 per cent for higher-rate taxpayers and 18 per cent to 10 per cent for those on the basic rate of income tax.

Liberal Democrats
Plans set out by the party last year include taxing capital gains as income and abolishing the £2,000 tax-free allowance available on dividend income. The Lib Dems also plan to introduce a flat 25 per cent rate of tax relief on pension contributions and abolish employee national insurance payments on those contributions. Last year the party called for the tax-free lump sum that can be withdrawn from pensions to be limited to £40,000 “restricting the amount of relief those with the largest pension pots can receive without paying any tax, while leaving 75 per cent of pension drawdowns unaffected”.
Everyone would have a lifetime tax-free inheritance allowance of £250,000 and beyond this wealth transfers, including gifts, would be taxed as income. Small annual gifts, spending on a child’s education and transfers to spouses and charities wouldn’t count towards the allowance, it stated in its report Giving Everyone a Stake.

SNP
The Scottish National Party has previously said it is opposed to lowering income tax thresholds for higher earners.

PENSIONS

Conservatives
Tom Selby, a senior analyst at AJ Bell says: “Perhaps the most politically toxic area of pension policy centres around plans to increase the state pension age. Under accelerated plans announced by the Conservatives in 2017, the state pension age will rise to 67 by 2028 and 68 by 2039, a full seven years earlier than had been proposed.” The amount paid in the state pension rises each year in line with whichever of three factors are higher: average earnings, inflation or 2.5 per cent. This “triple lock” was introduced by the coalition government, but the Tory party has suggested moving to a “double lock” of average earnings or inflation from 2022.

Labour
According to its 2017 manifesto Labour would halt proposed increases to the state pension age beyond 66 and commission a review. In the last manifesto it committed to keeping the triple lock for the next parliament.

Others
The Liberal Democrats and SNP have previously committed to the triple lock and the SNP has said it is opposed to an increase in the state pension age beyond 66.

INVESTMENT

Conservatives
The party’s proposed income tax cuts would provide a big boost for high-earning pensioners, says Nimesh Shah of Blick Rothenberg, an accountancy firm.
He says: “Those relying on their savings for income will be able to receive up to £30,000 more in savings income taxed at the basic rate of 20 per cent rather than the higher rate of 40 per cent. This could be worth up to £6,000.”
A £5 billion “infrastructure revolution” that the chancellor spoke of at the party conference could give a lift to construction companies and infrastructure investment trusts, although sceptics have already questioned how much money will be available. What’s more, Shah says, large tax cuts and big public-spending initiatives will have to be paid for and one prime target could be higher-rate tax relief on pension contributions.

Labour
Among Labour’s most eye-catching proposals are its plans to nationalise large sectors of the economy and to give workers a stake of 10 per cent in all large UK companies. The shares would be controlled collectively by the workers, but could not be sold, so there would be no capital gains. Workers would be entitled to dividends of up to £500 a year, but anything above that would go to the government. The scheme could benefit an estimated 10.7 million workers. The losers would be the existing investors in the companies, including pension funds, that hold billions of pounds on behalf of millions of savers.
Labour could also have its sights set on venture capital trusts and enterprise investment schemes, which offer tax breaks of up to 30 per cent for investing in budding businesses. Ben Yearsley of Shore Financial Planning says: “The two schemes are perceived as a tax break for the wealthy and could be abolished or slashed.”
Investors seeking to generate returns through capital growth rather than income will be disappointed by Labour’s proposal to abolish the lower rates of CGT — 10 per cent on share-based investments and 18 per cent on property — and move everything to the higher rates of 20 and 28 per cent.

Liberal Democrats
Part of the Liberal Democrats’ plan to reform the tax system includes a commitment to ensure that multinational companies “pay their fair share in taxation”. While this is likely to be popular, it will potentially hit the portfolios of millions of people who hold stakes in Amazon, Facebook and Microsoft through their pension funds.

PROPERTY

Conservatives
Johnson has said he would consider scrapping stamp duty on homes worth under £500,000. It is estimated that this would save first-time buyers up to £5,000 and other homeowners up to £15,000. Johnson also wants to cut the top rate for properties above £1.5 million from 12 per cent to 7 per cent. The chancellor has scotched reports that liability for the tax could be switched from buyer to seller. “Abolishing stamp duty wouldn’t do much to house prices, but it would boost transactions, particularly in London and the southeast where stamp-duty bills are the highest,” says Capital Economics, a consultancy.
The Tories will make it easier for low earners to buy a stake in their home through shared ownership, and have hinted at extending Help to Buy.

Labour
Your home would no longer be your asset. Land for the Many, a radical report backed by Corbyn, but not party policy, would abolish stamp duty on people’s main residence, but increase capital gains tax on second homes. Instead of council tax, owners would pay a property tax based on house prices. The result “could be rapidly falling house prices”, the report says.
To give sellers some price protection, a publicly backed trust could buy the ground beneath houses. Buyers would purchase only the home and pay land rent to the trust. This rent “would be even higher than rates on high loan-to-value mortgages”, says Boulger.

Liberal Democrats
Although the Lib Dems have abandoned their plan for an annual “mansion tax” on homes above £2 million, their plans for higher council tax bands would have a similar effect. Long term they would review replacing council tax with an annual tax on property values.

RENTING

Conservatives
There is no sign that landlords could have it any easier under another Tory government, having already been hit with 3 per cent extra stamp duty, cuts to tax relief and tougher lending rules.

Labour
Private tenants could get a right to buy the homes they live in under plans floated by McDonnell. This will make landlords nervous about making purchases until the detail of the proposal becomes clearer. The policy “is littered with potential unintended consequences”, Capital Economics says.
Labour promises to cap private rent rises at the rate of inflation. At conference its members voted to build 155,000 homes a year for social rent, which “would require significant levels of grant funding”, says Lawrence Bowles of Savills, an estate agency.

Liberal Democrats
The Lib Dems would end landlords’ right to take back their properties without a reason, which campaigners blame for rising homelessness. Labour had made the same pledge in its last manifesto and the Tories hijacked the idea with a surprise plan to make it law under Theresa May. Johnson has since left it out from bills trailed in the Queen’s speech.

Top tips to move home before the big day

Top tips to move home before the big day

WARREN LEWIS | PROPERTY REPORTER
11TH SEPTEMBER 2019

OK, I’m going to use the C-word, so cover your ears if this is likely to offend you. Ready? Christmas. Whether you like it or not, the festive season is fast approaching and those considering a house move should act quickly if they want to be in before the big day.
The conveyancing experts at JMP Solicitors have compiled a list of top tips for moving house, taking into account logistical considerations such as smartening up a premises, and organising belongings, pets and post.

1. Get the property ready for marketing
Once the decision has been made to move house before Christmas, it’s a good idea to smarten up your home before putting your property on the market.
Declutter the property and redecorate if necessary, a coat of paint can work wonders, as can giving the house a deep clean, emptying the loft and turning the storage/junk room into a useable space. Your property will then be more appealing to a prospective buyer, especially with a realistic price tag – always check the competing market.
It’s also worth ensuring that you get the best survey you can before you commit to any purchase, if the boiler does not work and you’ve already moved in, prepare for an expensive replacement, especially around Christmas time.

2. Be patient
It’s important to be clear on timescales which can often shift depending on how long a chain is. Sometimes you have no option but to sit tight, however you can still communicate your wishes to an estate agent and solicitor who can then communicate these to a buyer/seller on your behalf. Such an approach doesn’t guarantee success, but it does increase the chance of a successful resolution. Ensure when viewing a property, you make it clear that you want to move before Christmas and check how the seller responds. The last day you can move house and complete the sale before Christmas is Friday 20 December 2019.

3. Choose your removal company wisely
Moving house without the help of a removal company may be cheaper, but it can also be very stressful. If you are opting for DIY packing, it is best to start as early as two weeks before your moving date to box up items you aren’t currently using. This will make the whole process less stressful and will also help with the de-cluttering of items that you never use or don’t need, which can go to charity. Writing the contents and room on each box will help organise your packing and make unpacking easier. If you don’t fancy packing yourself, get your removals company to pack for you. A good removals company will be able to supply you with purpose-built boxes and packing materials, and they will offer various packing options to suit you.

4. Don’t forget to tie up loose ends
Be sure to inform utility companies that you are moving and have all mail forwarded to your new address once you have exchanged contracts. Write your Christmas cards in plenty of time and post with your new address pre-printed inside, this saves time and money on separate letters and messages.

5. Look after your pets
Both pets and young children can find moving house very stressful. Whilst animals can be kept safe and secure in a separate room to the unpacking, it is best to see if family or friends can look after children for the day so that they do not get anxious about the moving process and leaving their old home, this way they won’t feel unsettled and can just enjoy the excitement of arriving at their new home.