More must be done to convert 'Generation Rent' into homeowners
The observations from Kevin White, Head of Financial Planning at deVere United Kingdom, part of deVere Group, one of the world’s largest independent financial advisory organisations, come two weeks ahead of the introduction of the government’s Help to Buy ISA (HISA) on 1 December. The initiative was announced by the Chancellor, George Osborne, in this year’s Budget.
Mr White comments:
“With the Help to Buy ISA, first-time buyers can save up to £200 per month and the government will add 25 per cent on top of the savings. Savers need to save at least £1,600 to get the minimum bonus of £400. The most savers will receive the bonus on is £12,000, meaning £3,000 for five years of saving.
“In effect, it is free cash from the government and anyone who is aspiring to buy their first home would be mad not to do this.
“The overwhelming majority of Britons dream of owning their own home and this is a hugely positive step in the right direction to help people get on the property ladder.
“However, even with the maximum HISA saving plus the government bonus, meaning a total of £15,000, most first time buyers will still find that they’re £15,000 short for the average deposit.”
He continues: “With this in mind, much more must be done to help Generation Rent achieve their financial goals. Too many people in their 20s and 30s are desperately keen to leave their rented accommodation and/or their parents’ home and to buy a place of their own but simply can’t afford to do so.
“Therefore, it is imperative the government, the financial services industry and consumer groups unite to reignite the savings culture. Saving must once again become Britain’s social norm.
“It is our experience that many people do indeed want to save but are not in a financial position to put money aside.
“We believe this could be helped to be turned around with a three-pronged approach.
“First, we would urge the government to create a comprehensive savings charter. Government needs to make saving worthwhile by, for instance, offering more proper incentives, such as the HISA, and reversing existing and planned tax raids on pensions.
“Second, the financial services sector could do more to help people get more from their savings. For example, it could make it easier to switch bank accounts, and also develop new, accessible and simple-to-use financial products and solutions to give today’s young people more options.
“And third, we need the government, the industry and consumer to work more cohesively to educate people on the real importance of saving. We need to highlight the value of long-term security over short-term gratification.
“Savings give people a buffer when things go wrong, they act as protection, and they also give people more life opportunities. And, on a wider scale, a society that has savings is less reliant on the State, which is good news for the long-term sustainable economic growth of the country.”
Mr White concludes: “Help to Buy ISAs offer a helping hand to Generation Rent but they need a leg-up in other areas too to achieve their ambitions.”