Not as much help to buy as we thought?

Financial services firms have learned through hard won experience not to promise more than they can deliver to customers and clients. Yet the news this summer suggests an important segment of new customers may be about to get rather annoyed, although perhaps they should be directing their ire at the government this time.

The Telegraph has reported that savers will be outraged because their Help to Buy ISA is not going to be as much help as they thought when it comes to getting on the housing ladder. It means quite a lot of people could be disappointed as more than half a million of the products have been taken out to date.

The devil, as it often is, in the detail. The issue surrounds the very attractive government uplift of 25% to the amount saved and when it can be used. With the Treasury determined to ensure it is used to pay for a house and not be spent on anything else, the ‘bonus’ is only released after contracts are exchanged, when it can be used to pay down the mortgage further.

Clearly no-one is losing money here. But it does suggest that the product has been marketed on the basis of doing something that it cannot.

For the team at Space that doesn’t really appear to wash. Our view is that when products are launched, the government should really hold itself to the same standards as financial firms.

The then Chancellor George Osborne said at the launch of the scheme that this “new ISA provides direct government support to anyone saving for the deposit on their first home.”

The Treasury has to act responsibly when it offers financial help and to make sure the money on offer is used as intended. Yet we wonder whether the new Chancellor Philip Hammond couldn’t find a way of re-examining the finer details and adjusting them so that the Help to Buy ISA really helps with a deposit. In tough financial times and with huge challenges ahead, it may even be an easy way to win a few plaudits.

In the meantime, banks may need to run their eyes over their marketing and sales processes now it is clear that the Housing ISA doesn’t quite do what it says on the tin.

The Help to Buy ISA is due to be replaced with the Lifetime ISA next year, though the latter is intended either for home purchase or to save for retirement which is quite a challenge and one many banks and fund firms are grappling with now.

Like the Help to Buy ISA, we expect the LISA to be very popular among younger savers and investors. It could be a very important way to get younger people into the habit of savings and investing.

The Government has just published a bill to pave the way for the LISA but we still don’t have all the details yet, but when they are issued, at Space we will be pouring over them when they are finalised just to check for any pitfalls.

Home owners and potential home owners are a key segment of voters and this sort of scheme, whether the Help to Buy ISA or the Lifetime ISA allows the government to show it is on the side of aspiration and that it wants younger people to start taking more responsibility.

But we think the government also has a responsibility to be clear, fair and not misleading – unwittingly or not. Allowing financial firms to meet the rules with confidence while doing right by customers too, especially people who may be relatively new to saving.