Help to Buy ISA: who’s it helping?
If you’ve taken out a Help to Buy ISA to help you boost your deposit, you could be forgiven for being pretty fed up now. Why? Because it’s emerged that the government’s flagship tax-free cash savings product that was launched with a big fanfare last December to help first time buyers save a deposit..err.. can’t be used towards the deposit if you want the government’s bonus.
The reason that help to buy ISAs have been so popular (and over half a million people have them) is that they offer you a rare opportunity to get free money from the government. If you save £12,000 in a help to buy ISA, you’ll get £3,000 from the government.
The government did make it clear when help to buy ISAs were launched that the bonus would be paid direct to the mortgage lender by your solicitor when you buy a property. But many people – understandably – assumed that the government bonus could be paid when you exchange contracts for the property and not when you complete (which is when you get the keys).
It turns out that, when you cash in your help to buy ISA, you will only get the bonus when you complete on the purchase, although you can use the money you’ve saved in the ISA towards the deposit. The government says that the bonus specifically cannot be used towards the deposit, which – in my view – defeats the whole point of these accounts.
So, what should you do if you’re thinking of buying your first property or if you already have a help to buy ISA? Here are my thoughts:
- Don’t cash in your help to buy ISA now without buying a property because that way you’ll definitely miss out on the government bonus.
- If you have less than £1,600 saved in your help to buy ISA so far, you won’t get any government bonus. So, if you can afford it, top up your help to buy ISA to £1,600 so you’ll get a £400 bonus from the government (although not – sadly – for your deposit).
- You can use your help to buy bonus towards the cost of your property but not the deposit. You also can’t use the bonus to pay your solicitor’s fees or any other fees associated with buying a home.
- Help to buy ISAs currently pay a better interest rate than equivalent cash ISAs. However, they can only be used if you’re buying a property costing up to £250,000 in England or £450,000 in London – so they may not help everyone. If you’re buying with someone else, you can each take out a help to buy ISA.
SAVVYWOMAN TIP: Some consumer groups say that banks have been guilty of mis-selling. In my view, thousands of people may well have taken out these ISAs on the basis of incorrect information given by their bank or building society. But in order to get any compensation, they’d have to show they’d lost out financially as a result. And banks could say that politicians didn’t exactly spell out how these accounts would work.
Watch out for bogus energy bill emails
There’s a new email scam doing the rounds and, if you don’t know about it, you might just fall for it. The scam involves an email supposedly from British Gas about ‘Your Summer Gas and Electricity Bill’. I received one of these fake emails with the subject header ‘Your Electronic Bill’, so there are definitely a few variations doing the rounds.
If you open the email, you’re directed to a website where you have to download a file to look at your bill. Don’t! If you do, your computer will be infected by a virus and you’ll be taken to an online payments page.
British Gas told me it’s aware of this scam and advises people to forward the email to firstname.lastname@example.org and then delete it. If you prefer, you can tell Action Fraud on 0300 123 2040 or via their website: Actionfraud.police.uk.
Watch your car insurance costs
If you’re about to renew your insurance, make sure you shop around and don’t just let your policy automatically renew. From next April insurers will have to tell you how much you paid last year, as well as your renewal price, when they ask you to renew, but it’s not in place just yet.
Many car insurance policies are automatically renewed and, while there’s a good reason for it in theory (driving without insurance is illegal), it also means it’s easier to sleep walk into renewing with the same company.
You can cut your car insurance costs by:
- Haggling with your existing insurer after you’ve compared premiums on price comparison sites. It’s much easier to haggle if you can tell your insurer how much cheaper you could insure elsewhere.
- Paying upfront rather than monthly if you’re being charged interest. Some insurers don’t charge extra if you pay monthly, but many do. This interest rate can be high – as high as 20%.
- Comparing the costs of comprehensive and third party insurance. You might think that third party insurance would be cheaper because it will only pay out for damage caused by you to someone else (or their car). It won’t pay out for any damage to your own car. However, some insurers take the view that you’re a bigger risk if you take out third party insurance, so charge less for fully comprehensive cover.
- Considering changing the level of the excess. The excess is the first part of any claim that you have to pay. It can be as little as £100 and as much as £500 or more. Personally, I wouldn’t recommend increasing the excess too much unless you’re sure you can pay it (sounds obvious, I know!).
More than 1.5 million families are in extreme debt
A new report says that over 3.2 million families are in ‘problem debt’ where they pay more than a quarter of the money they earn on their debt repayments. But – worryingly – 1.6 million families are in extreme debt – where almost half their income (40%) goes on paying back their debts.
If you’re using a lot of your income to pay down debt over a few months, that’s one thing. But if a large chunk of your income goes on paying loans, credit cards, payday loans and/or store cards, it’s probably time to get some help.
SAVVYWOMAN TIP: Don’t wait until your problem becomes a crisis before you get help. The longer you leave it, the fewer options you’re likely to have. Talk to a provider of free debt advice such as Stepchange, Payplan, National Debtline or Citizens Advice (rather than paying for debt advice).