Last month’s Budget had a number of important changes to savings policy in this country that could help improve you’re financial planning.
If you are a first-time buyer then there was a specific policy pledge to offer Government financial support to get on the housing ladder.
We are pleased to see the creation of anew Help to Buy ISA that will offer first-time buyers a grant from the Treasury of up to £3,000 towards their first home.
Any borrower who puts £1,000 into an Isa wrapper and adds £200 a month up a maximum of £12,000 will receive a 25 per cent boost from the Treasury
It will take four years and seven months to reach the maximum limit but offers a huge boost to savers of up to an effective rate of 25% interest.
For example, if you save for one year at maximum levels with the £1,000 starting fund then you will have saved £2,200 and the Treasury will add an extra £550 when you buy your first home. That is a huge boost to savers.
It is help for youngsters comparable to the support for older savers in the last Budget which unveiled market-busting pensioner bonds for the over-65s.
There are £15bn worth of bonds available to all pensioners at market-busting rates of 2.8% for one year and 4% over three years.
If you are not a first-time buyer then there was still some financial planning gems to cheer you up in this year’s Budget and we were pleased to see some help for savers.
We were thrilled to see George Osborne create a £1,000 tax-free allowance on the interest of cash savings for basic rate taxpayers. For higher rate taxpayers there is a £500 limit.
It means that anyone in the 20p income tax bond – up to £41,000 a year income – will be able to earn £1,000 in interest on their cash savings tax-free. It is a variation on the tax-free savings wrapper under Isas and a big boost. Anyone who earned £1,000 interest on cash would have been taxed £200 before the Budget.
We think that is positive news for mortgage holders who are looking to move up a rung on the housing ladder or buy their first home.
We are big advocate of taking rounded financial advice to make the best plan for your saving affairs in the round.
We also know that property can be an excellent savings vehicle and paying lower interest rates or lower mortgage terms can be a great way of saving cash.
Flexible mortgages such as interest-only deals or offset can be an excellent way of saving money for a rainy day and paying less interest to your lenders.
Mortgage brokers are excellent at searching the market for deals that are not just good value but, more importantly, suit your needs in the round.
If you have a pension or big savings then it may be helpful to your mortgage to declare a recurring income to lenders.
It could also affect how much you can lend so it is always worth telling your mortgage adviser your full financial picture.