Give it up, it's never going to happen. Image: Getty.
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If you're a first time buyer, don't let Osborne fool you: he hates your guts

The first time buyer ISA won't even get you close.

Rejoice, first time buyers! Rejoice! Chancellor George Osborne, your friend and mine, has come up with a nifty new scheme to help you save your deposit.

For every £1 you save in a new first-time-buyer ISA, the government will top it up by an extra 25 pence – up to a maximum of £250 a month. In all, the government is willing to give you an extra £3,000, effectively for free. Can't say fairer than that.

Except, actually you can – because today's Budget was a bit light on measures to increase housing supply. Without such measures, house prices will continue to climb inexorably. And, unless that changes, this scheme isn’t going to be that helpful for anyone who doesn't already have a pile of money.

Demonstrating this gets a bit maths-y, but bear with us. The Office for National Statistics produces a house price index, which stood at 100 in February 2002. By December 2014, 154 months later, it had more than doubled, and stood at 206.9. Do some sums, and you’ll find that, over that 13 year period, house prices on average increased by about 0.4732 per cent each month.

(Obviously, they didn’t do anything of the sort. Reality isn’t that straightforward: there are booms and busts, different regions see different trends, and so forth. Nonetheless, we’re only looking for a sense of the way prices increase over the long term, so this’ll do for our purposes.)

Let's assume this growth rate continues: each month, house prices continue to increase by 0.47 per cent. Last August, the average first-time-buyer deposit stood at £27,719, but that was seven months ago so, assuming that the proportion of your house price you need to save for a deposit has stayed the same, the average deposit will now stand at £28,650.

Now imagine that a 25 year old hears of Osborne’s generous new scheme, gets all excited about it, and starts saving £200 a month this very day, just to get hold of that £50 government top up. Assuming the ISA pays an annual interest rate of approximately 3 per cent, which isn’t bad going right now, it should take them just over eight years.

By August 2023, then, when our 25 year old is 33, they'll have their deposit. Brilliant.

Except that they won't.

One reason is that we’ve forgotten about that £3,000. Our putative homeowner, who is stretched enough that they can only save £200 a month, runs slap bang into that target in March 2020, several years before they've reached their goal. After that, they're on their own, so the graph of their savings actually looks like this:

The point at which the government bribe comes to an end, and the rate of growth reduces, is barely visible (hence our broken red line to highlight it). But it is there, nonetheless: now our plucky saver doesn’t reach their target until April 2024, a good eight months after they’d first expected to.

But even if that weren't true, they still wouldn't be able to climb onto the housing ladder, because house prices are growing, too. By April 2024, on long run rates of growth, the average deposit should stand at £47,929. If our poor hard-working renter keeps saving their £200 a month, they’ll get to that target by August 2029, by which time the average deposit is £64,836. They’re still £17,000 short.

What’s really insidious is that, unless they save more, they always will be. Around August 2030 (by which time our 25 year old is 40 and still doesn’t own a house), the increase in house prices each month becomes larger than the increase in our renter's savings. Each month, rather than the target getting closer, it begins to recede into the distance.

If the government were to extend its free money scheme, that point would come a few years later – but it would still come.

There are a lot of assumptions here – about interest rates, the rate of house price increase, and so on. You’d hope that someone who can save £200 now should be able to save a bit more than that in future.

In practice, many first-time buyers aren’t individuals, but couples; and it’s in the nature of averages that a fair few people be buying with smaller deposits. It would be untrue to say that Osborne’s scheme won’t be useful to anyone, because it clearly will. 

But the people it'll be useful to are mostly those who are already sat on a big pile of money with which to buy a house, and just need a little bit of help to get them over the top. If an individual first-time-buyer relies purely on the government backed ISA, then they will never, ever reach their savings target. Despite what the government has implied, saving £250 a month simply isn’t enough. Either house prices have to come down, or ISA interest rates have to go up, or they need to find a hell of a lot more than £200 a month.

Oh, and this is assuming that pumping more money into the housing market without significantly increasingly supply – as this government has repeatedly done – won't push up house prices yet further. Which it almost certainly will.

If you're a first time buyer, don't let Osborne fool you: he hates your guts.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.

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Hannan Fodder: This week, Daniel Hannan gets his excuses in early

I didn't do it. 

Since Daniel Hannan, a formerly obscure MEP, has emerged as the anointed intellectual of the Brexit elite, The Staggers is charting his ascendancy...

When I started this column, there were some nay-sayers talking Britain down by doubting that I was seriously going to write about Daniel Hannan every week. Surely no one could be that obsessed with the activities of one obscure MEP? And surely no politician could say enough ludicrous things to be worthy of such an obsession?

They were wrong, on both counts. Daniel and I are as one on this: Leave and Remain, working hand in glove to deliver on our shared national mission. There’s a lesson there for my fellow Remoaners, I’m sure.

Anyway. It’s week three, and just as I was worrying what I might write this week, Dan has ridden to the rescue by writing not one but two columns making the same argument – using, indeed, many of the exact same phrases (“not a club, but a protection racket”). Like all the most effective political campaigns, Dan has a message of the week.

First up, on Monday, there was this headline, in the conservative American journal, the Washington Examiner:

“Why Brexit should work out for everyone”

And yesterday, there was his column on Conservative Home:

“We will get a good deal – because rational self-interest will overcome the Eurocrats’ fury”

The message of the two columns is straightforward: cooler heads will prevail. Britain wants an amicable separation. The EU needs Britain’s military strength and budget contributions, and both sides want to keep the single market intact.

The Con Home piece makes the further argument that it’s only the Eurocrats who want to be hardline about this. National governments – who have to answer to actual electorates – will be more willing to negotiate.

And so, for all the bluster now, Theresa May and Donald Tusk will be skipping through a meadow, arm in arm, before the year is out.

Before we go any further, I have a confession: I found myself nodding along with some of this. Yes, of course it’s in nobody’s interests to create unnecessary enmity between Britain and the continent. Of course no one will want to crash the economy. Of course.

I’ve been told by friends on the centre-right that Hannan has a compelling, faintly hypnotic quality when he speaks and, in retrospect, this brief moment of finding myself half-agreeing with him scares the living shit out of me. So from this point on, I’d like everyone to keep an eye on me in case I start going weird, and to give me a sharp whack round the back of the head if you ever catch me starting a tweet with the word, “Friends-”.

Anyway. Shortly after reading things, reality began to dawn for me in a way it apparently hasn’t for Daniel Hannan, and I began cataloguing the ways in which his argument is stupid.

Problem number one: Remarkably for a man who’s been in the European Parliament for nearly two decades, he’s misunderstood the EU. He notes that “deeper integration can be more like a religious dogma than a political creed”, but entirely misses the reason for this. For many Europeans, especially those from countries which didn’t have as much fun in the Second World War as Britain did, the EU, for all its myriad flaws, is something to which they feel an emotional attachment: not their country, but not something entirely separate from it either.

Consequently, it’s neither a club, nor a “protection racket”: it’s more akin to a family. A rational and sensible Brexit will be difficult for the exact same reasons that so few divorcing couples rationally agree not to bother wasting money on lawyers: because the very act of leaving feels like a betrayal.

Or, to put it more concisely, courtesy of Buzzfeed’s Marie Le Conte:

Problem number two: even if everyone was to negotiate purely in terms of rational interest, our interests are not the same. The over-riding goal of German policy for decades has been to hold the EU together, even if that creates other problems. (Exhibit A: Greece.) So there’s at least a chance that the German leadership will genuinely see deterring more departures as more important than mutual prosperity or a good relationship with Britain.

And France, whose presidential candidates are lining up to give Britain a kicking, is mysteriously not mentioned anywhere in either of Daniel’s columns, presumably because doing so would undermine his argument.

So – the list of priorities Hannan describes may look rational from a British perspective. Unfortunately, though, the people on the other side of the negotiating table won’t have a British perspective.

Problem number three is this line from the Con Home piece:

“Might it truly be more interested in deterring states from leaving than in promoting the welfare of its peoples? If so, there surely can be no further doubt that we were right to opt out.”

If there any rhetorical technique more skin-crawlingly horrible, than, “Your response to my behaviour justifies my behaviour”?

I could go on, about how there’s no reason to think that Daniel’s relatively gentle vision of Brexit is shared by Nigel Farage, UKIP, or a significant number of those who voted Leave. Or about the polls which show that, far from the EU’s response to the referendum pushing more European nations towards the door, support for the union has actually spiked since the referendum – that Britain has become not a beacon of hope but a cautionary tale.

But I’m running out of words, and there’ll be other chances to explore such things. So instead I’m going to end on this:

Hannan’s argument – that only an irrational Europe would not deliver a good Brexit – is remarkably, parodically self-serving. It allows him to believe that, if Brexit goes horribly wrong, well, it must all be the fault of those inflexible Eurocrats, mustn’t it? It can’t possibly be because Brexit was a bad idea in the first place, or because liberal Leavers used nasty, populist ones to achieve their goals.

Read today, there are elements of Hannan’s columns that are compelling, even persuasive. From the perspective of 2020, I fear, they might simply read like one long explanation of why nothing that has happened since will have been his fault.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.