MSE News: Budget 2015: Help to Buy ISAs to launch

Wilma33

amiehall wrote: »

Is it definite that you'll be banned from having this together with a standard cash ISA? Or is the article just assumptions? Seems a bit ridiculous to just casually mention that 2 weeks before the new tax year. I'll be buying a home in 2-3 years so this would be a great home for some of my savings in the meantime but I currently pay about £1000 a month into a regular saver ISA, need to make a swift decision about whether to stop or continue.

Yes, I'm also confused about whether I'm ok to start using my normal ISA allowance on 6 April :-/

System

Hi all, it says this doesn't kick in until Autumn of 2015 and Martin says in the first year you can save a max of 3,400 but that can't be possible if it goes from Autumn to spring...bit confusing.

Weirdly it seems Nationwide have one you can open now in store so i'm doubly confused.

Anyone in the know about this? Thanks, Eloise

System

Semple wrote: »

Although it is a lot better, a top rate regular saver @6% with 250 max monthly deposits will net you about £75-£80 interest over the year. The HTB ISA over a year (Assuming you open with £1,000 and top up with £200 monthly deposits) will give you £3,400 before any interest is applied, and excluding the £600 the government will give to the mortgage lender *on your behalf*.

What is interesting, as pointed out in the beginning of the thread. £1,000 opening balance and 48 additional deposits of £200, only equates to £10,600, plus £2,400 (48 deposits of £50) and £250 from the initial £1,000 deposit. Gives a grand total of £13,250 (excluding any interest earned). So not sure how it'll be possible to reach the £3,000 maximum limit.

You get an unlimited time to save (the 4 years part only refers to how long you have to actually get around to open it) so you can save the full amount to get the 3,000 from the gov.

agarnett

Semple wrote: »

What is interesting, as pointed out in the beginning of the thread. £1,000 opening balance and 48 additional deposits of £200, only equates to £10,600, plus £2,400 (48 deposits of £50) and £250 from the initial £1,000 deposit. Gives a grand total of £13,250 (excluding any interest earned). So not sure how it'll be possible to reach the £3,000 maximum limit.

Yes it does look a bit like it was an idea thrashed out on the back of an envelope in the pub.

[STRIKE]I forgot about the initial deposit of up to £1,000 when I worked out the equivalent %APR to achieve the £15,000 total at the end. My rough 23%APR assumed just 48 months x a regular payment of £200 had been turned into £15,000 and my spreadsheet tells me that requires just under 23% pa for that.

Front ended with £1,000, the APR to turn it plus 48 months at £200 pm into the headline £15,000 becomes about 17.5%.[/STRIKE]

The puzzle is somewhat demystified by Elobeans above on how £250 initially from HMG plus £50 pm x 48, ever becomes £3,000. And how the £1,000 + £200 pm x 48 = £11,600, ever becomes £12,000! I thought maybe it was simultaneously a guaranteed minimum and a maximum to include interest if you save the maximum, or some such half-baked idea! But it seems that to get given the full £3,000, you need to save at least 60 x £200 and the fastest you can do it is I think 5 x £200 =£1,000 deposit right at the start, then 55 months at £200.


Now my spreadsheet tells me that if you simply forget the confusing nonsense about the government bonus, and simply check what rate of APR% wins you £15,000 after 55 months if you've put down £1,000 to start, and then paid £200 pm x 55, then you might actually understand what sort of deal this is and what it has been dressed up as. Someone please be my guest and tell me what fantastic interest rate it actually equates to please ?

As I say, forget the diversionary smoke and mirrors bonus that you cannot see ot touch until the end when you've bought your house (and maybe not even then unless it is cashback!). Just keep your eye on your own saved cash.

And I still have seen nothing about how the bonus actually is applied - is it indeed a cashback deal paid by the lender after completion, or is it advanced as free loan money, or what?

Having got my head around Elobeans reminder that the £15K does NOT miraculously come together in just four years, but would require the 4 years 7 months that trevormax mentioned in post #17 on page 1 of this thread, the whole thing now looks to me as still something of an ill-thought out, or possibly even deliberately misleading gimmick. Trevormax saw that bit, and he then went on to conclude (like most of us) that its "free money". But it isn't as much as I at first thought! Such a complicated way of presenting an idea for what I think is just a variation on enhanced fixed interest with a major penalty for withdrawing and not buyng a house! One really does wonder if the whole bloody budget speech was just an unbelievable attempt at BBB just like Ed Milliband was suggesting in his response.

By the way, the Nationwide "Save To Buy ISA" contract seems to have little or nothing to do with the HTB kite flown by George Osborne yesterday.

As can be seen in the following Wayback Machine link, the Nationwide "Save To Buy ISA" has been arround since at least last July.

leftfield20

I don't know if I'm being dumb (probably) but why are all the calculations based on 48 payments of £200? Surely we just keep making the £200 deposits until we hit £12000 (55 payments after the initial £1000).
Then we can get the max payment of £3000 from the govt.

jaxkesa

Elobeans wrote: »

Hi all, it says this doesn't kick in until Autumn of 2015 and Martin says in the first year you can save a max of 3,400 but that can't be possible if it goes from Autumn to spring...bit confusing.

Weirdly it seems Nationwide have one you can open now in store so i'm doubly confused.

Anyone in the know about this? Thanks, Eloise

If you're referring to the 'Save to Buy ISA', this is just a separate ISA product Nationwide do which gives you access to their 5% LTV mortgages if you save at least £50 a month for 6 months or more.

I've been paying into one for about 2 years.

agarnett

dfub wrote: »

I don't know if I'm being dumb (probably) but why are all the calculations based on 48 payments of £200? Surely we just keep making the £200 deposits until we hit £12000 (55 payments after the initial £1000).
Then we can get the max payment of £3000 from the govt.

Dfub, you aren't being dumb, it's just some of the rest of us were being dumb. We really did not expect such a hyped bonus (a "free" £3,000!) to turn out to be quite as unextraordinary as it first sounds.

If a first time buyer takes one of these and saves £12,000 of their own money exactly as you say, then I think we have been led to believe that they will not receive a penny more than £15,000 at the end. The end is not earlier than 55 months away.

Forget the smoke and mirrors "bonus" for the moment. Just calculate what savings APR equivalent would be required to turn that £12,000 into £15,000 in 55 months when it is saved the way you describe - £1,000 deposit then 55 x £200. I think you might be surprised.

leftfield20

Thank you for your answer, agarnett and I'm intrigued but also I think I've not grasped the concept entirely.
So does the account does not accrue any "regular" interest over the 55 months?
If I understood it correctly and based on the online calculators I just used I would need a savings AER of 9% to turn £12,000 into £15,000?
I just don't see the downside and I know I'm missing something here! (sorry about you having to spell it out for me lol)

agarnett

I am slightly less perturbed than I was a few minutes ago because I made a mistake in my spreadsheet!

I think the bonus equates to an APR of around 8.91%:
Mth¨8.91%¨¨B/F¨¨Saved pm¨Interest¨C/F
INIT Oct-15 £0.00¨¨¨£1,000 £7.26 £1,007.26
1¨¨¨ Nov-15 £1,007.26 £200 £8.48 £1,215.73
2¨¨¨ Dec-15 £1,215.73 £200 £10.27 £1,426.00
3¨¨¨ Jan-16 £1,426.00 £200 £11.80 £1,637.80
4¨¨¨ Feb-16 £1,637.80 £200 £12.47 £1,850.27
5¨¨¨ Mar-16 £1,850.27 £200 £14.92 £2,065.19
6¨¨¨ Apr-16 £2,065.19 £200 £15.95 £2,281.13
7¨¨¨ May-16 £2,281.13 £200 £18.05 £2,499.19
8¨¨¨ Jun-16 £2,499.19 £200 £19.00 £2,718.19
9¨¨¨ Jul-16 £2,718.19 £200 £21.23 £2,939.42
10¨¨ Aug-16 £2,939.42 £200 £22.84 £3,162.26
11¨¨ Sep-16 £3,162.26 £200 £23.67 £3,385.93
12¨¨ Oct-16 £3,385.93 £200 £26.09 £3,612.02
13¨¨ Nov-16 £3,612.02 £200 £26.84 £3,838.85
14¨¨ Dec-16 £3,838.85 £200 £29.38 £4,068.24
15¨¨ Jan-17 £4,068.24 £200 £31.05 £4,299.29
16¨¨ Feb-17 £4,299.29 £200 £29.56 £4,528.85
17¨¨ Mar-17 £4,528.85 £200 £34.40 £4,763.25
18¨¨ Apr-17 £4,763.25 £200 £34.94 £4,998.19
19¨¨ May-17 £4,998.19 £200 £37.82 £5,236.01
20¨¨ Jun-17 £5,236.01 £200 £38.27 £5,474.28
21¨¨ Jul-17 £5,474.28 £200 £41.28 £5,715.56
22¨¨ Aug-17 £5,715.56 £200 £43.04 £5,958.60
23¨¨ Sep-17 £5,958.60 £200 £43.36 £6,201.96
24¨¨ Oct-17 £6,201.96 £200 £46.58 £6,448.53
25¨¨ Nov-17 £6,448.53 £200 £46.80 £6,695.34
26¨¨ Dec-17 £6,695.34 £200 £50.17 £6,945.50
27¨¨ Jan-18 £6,945.50 £200 £51.99 £7,197.49
28¨¨ Feb-18 £7,197.49 £200 £48.59 £7,446.08
29¨¨ Mar-18 £7,446.08 £200 £55.63 £7,701.71
30¨¨ Apr-18 £7,701.71 £200 £55.63 £7,957.34
31¨¨ May-18 £7,957.34 £200 £59.35 £8,216.69
32¨¨ Jun-18 £8,216.69 £200 £59.25 £8,475.94
33¨¨ Jul-18 £8,475.94 £200 £63.12 £8,739.06
34¨¨ Aug-18 £8,739.06 £200 £65.04 £9,004.09
35¨¨ Sep-18 £9,004.09 £200 £64.80 £9,268.89
36¨¨ Oct-18 £9,268.89 £200 £68.89 £9,537.78
37¨¨ Nov-18 £9,537.78 £200 £68.55 £9,806.33
38¨¨ Dec-18 £9,806.33 £200 £72.80 £10,079.13
39¨¨ Jan-19 £10,079.13 £200 £74.78 £10,353.92
40¨¨ Feb-19 £10,353.92 £200 £69.33 £10,623.25
41¨¨ Mar-19 £10,623.25 £200 £78.53 £10,901.77
42¨¨ Apr-19 £10,901.77 £200 £77.94 £11,179.71
43¨¨ May-19 £11,179.71 £200 £82.56 £11,462.28
44¨¨ Jun-19 £11,462.28 £200 £81.88 £11,744.16
45¨¨ Jul-19 £11,744.16 £200 £86.66 £12,030.82
46¨¨ Aug-19 £12,030.82 £200 £88.74 £12,319.55
47¨¨ Sep-19 £12,319.55 £200 £87.89 £12,607.45
48¨¨ Oct-19 £12,607.45 £200 £92.92 £12,900.37
49¨¨ Nov-19 £12,900.37 £200 £91.97 £13,192.34
50¨¨ Dec-19 £13,192.34 £200 £97.17 £13,489.51
51¨¨ Jan-20 £13,489.51 £200 £99.32 £13,788.84
52¨¨ Feb-20 £13,788.84 £200 £94.92 £14,083.76
53¨¨ Mar-20 £14,083.76 £200 £103.92 £14,387.68
54¨¨ Apr-20 £14,387.68 £200 £102.70 £14,690.38
55¨¨ May-20 £14,690.38 £200 £108.33 £14,998.71
¨¨¨¨Jun-20 £14,998.71

So now I must go back and soften my earlier criticisms! And what I am not sure about is whether the provider will still add their own underlying Cash ISA type interest ? The Chancellor suggested in the budget speech that there'd still be some interest for those who don't complete on a house purchase. He didn't say how much, but I am guessing the provider might allow maybe 1.5%pa ? - I am sure they must do, but I do wish they'd thrash out the mechanics of these new ideas before they announce them as gospel. Whether there is a small provider interest payable on top of the bonus seems doubtful, so perhaps that's how the scheme is funded?

Maybe the government expects a maximum of say only one in 10 of these accounts ever to get to voucher issue stage, and it is robbing a little bit from nine 'Peters' who fail to get a voucher and get only token interest on their money, in order to pay the one 'Paul' their bonus voucher?

agarnett

I am sorry about the rollercoaster you witnessed in my dodgy now you see it now you don't calculations! Thanks for sticking with it - and interesting spreadsheet exercise which I believe I have got right now (fingers crossed!). Let's see if someone comes along and tears into it tomorrow! :beer: