Action needed on Help to Buy and Isa savings, says BBA

Sold sign outside house
Image caption Help to Buy has been introduced to assist those struggling to get on the ladder

The chancellor should raise the tax-free savings allowance and explain how a scheme to help house buyers should end, a bankers' trade body has said.

George Osborne should clarify his exit strategy for the Help to Buy scheme, according to the British Bankers' Association (BBA).

The second phase of the scheme includes a government guarantee for a proportion of mortgage repayments.

Meanwhile, the BBA argued that saving should be encouraged through Isas.

Isas - or Individual Savings Accounts - allow people to save, tax-free, up to an allowance of £11,520 a year. At present, only half of this can be saved in cash, but the BBA has suggested a change in the rules so all of the allowance can be put in a cash Isa.

Chancellor's speech

The BBA's arguments are made in a 13-page submission to the UK Treasury ahead of the chancellor's Autumn Statement on 5 December.

Its members operate 150 million accounts for UK customers and offer millions of pounds of loans to home buyers and small businesses.

Within the submission, the BBA urges Mr Osborne to explain how the Help to Buy scheme would be brought to an end after three years.

The scheme is designed to encourage lenders to offer mortgages with deposits as low as 5%. Critics are concerned it could help to create a UK housing bubble.

"It is early days for the Help to Buy scheme, but there are positive signs that it will allow many families to get on the property ladder and provide a wider stimulus to the economy," said Anthony Browne, the BBA's chief executive.

"However, we would urge the government to spell out a clear process to wind down Help to Buy when the time is right."

In the submission, the BBA said measures to support the supply of housing were "crucial", so that the increased activity in the market did not just translate into higher prices for buyers.

A spokesman for the Treasury said: "The Help to Buy scheme will run for three years.

"At the end of this period, if a future government proposes to extend the scheme, the independent Financial Policy Committee (FPC) of the Bank of England, the new body set up by this government to oversee financial stability, will give its assessment of whether the scheme should continue.

"The chancellor has also asked the FPC to work with him every September, starting next year, to assess the ongoing impact of the Help to Buy scheme."

Saving incentive

The BBA has also called for the government to support savers in the long term, especially when interest rates start to rise again.

This should focus on encouraging the Isa regime, it said.

At present, half of the annual Isa limit of £11,520 can be saved tax-free in a cash Isa, but the full amount can be saved in an Isa when the money is invested in stocks and shares.

The BBA has called for a change, so the total amount can be saved in cash.

It also wants to see the chancellor change the current ban on savers transferring funds from their stocks-and-shares Isa to a cash Isa.

"[This] would support those savers running down their assets to manage investment risk as they approach retirement," the BBA submission said.

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