The Treasury and high street banks are facing possible legal action under consumer rights law that they misrepresented the Help to Buy ISA scheme, it has been reported.
But a government spokesperson has insisted to EYE that the scheme had been properly explained.
The top-up funding is available to first-time buyers before completion, but not earlier.
According to the Telegraph, first-time buyers, promised a 25% Government bonus on top of their deposits, believed that they had been told that the “bonus” would be paid upfront – before exchange of contracts.
Over the weekend, the paper reported that claims had emerged that the money would be paid only after exchange
The Telegraph said it had heard from a number of would-be buyers who had had to face abandoning their purchase at the last minute, after assuming they could use the scheme bonus towards their deposit.
The newspaper claims that the Treasury has since “quietly updated” its website.
The Treasury has now hit back at suggestions that it tried to hide the time when the Help to Buy Isa bonus is paid to first-time buyers.
Economic secretary Simon Kirby said the paper had “misrepresented the scheme”.
Kirby said: “The bonus funds are available prior to completion and contribute towards an individual’s overall deposit.”
A Treasury spokesperson told EYE: “The Help to Buy ISA has been communicated in line with existing government and industry practices.
“The scheme rules and associated material has always been clear that the bonus will be paid just prior to completion and will go towards the equity in the property.”
Yesterday, the NAEA waded into the controversy, with managing director Mark Hayward saying: “Consumers have been putting money aside on the basis that they believed it would be applied to their deposit on a new home; to now clarify that it is not actually available until completion is the perfect example of a painful lack of transparency and frankly nothing short of deception.
“First-time buyers are already struggling with getting on to the housing ladder and this much hyped initiative was welcomed at the time as a way of helping them, but in fact could have ended up costing buyers if they have gone ahead with a purchase believing that the bonus counted towards the deposit.”
Comments (3)
Kirby said: “The bonus funds are available prior to completion and contribute towards an individual’s overall deposit.”
Really? This is copied from H2B website ‘The bonus must be included with the funds consolidated at the completion of the property transaction.’ So how are those funds available before completion?
And with that in mind, how can it contribute to the deposit when the deposit has to be paid on exchange? In fact their website goes on to say ‘The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.’
It also puts a huge question mark over the testimonials on their website. In Customer Stories ‘Alice’ says “Once we decided to go ahead we knew we had to get the money together for the deposit . . . . Help to Buy has made it a lot easier for us and means we’ll have our deposit much quicker.”
It’s a bit mad get all uppitty about terms and conditions that people failed to read and understand, especially when the funds are provided in time for completion.
There is no reason at all why exchange of contracts can’t occur without the traditional, but not set in stone 10% deposit so here’s a suggestion; try exchanging contracts with a 7.5% deposit not the full 10%. I’m fairly certain the lost interest on the clients’ deposit account won’t be enough to collapse the legal profession..
I have agreed a 5% deposit at exchange in the past. If you don’t ask you don’t get!