Martin Lewis shares warning to people under 40 who have never bought a house

15 January 2024 , 12:56

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Martin Lewis was asked whether a viewer should move their funds from a Help to Buy ISA to a Lifetime ISA (Image: ITV)

Martin Lewis has shared an important warning to anybody under the age of 40 who has yet to buy a house.

The finance expert made the comment on ITV's The Martin Lewis Money Show - after one viewer who had saved £1,745 in their Help to Buy ISA (HTB), should move the funds into a Lifetime ISA (LISA).

The HTB scheme ended back in November 2019, but those who opened the ISA prior to that date can pay in £200 each month to save for their first house. The government will top up 25 per cent of your savings - up to £3,000.

However, you can only pay into the ISA until November 2029, and the bonus will also be axed in November 2030. First-time buyers with this type of ISA can purchase a property up to £250,00 - or up to £450,000 if you live in London, where house prices are higher.

The LISA allows Brits to pay in up to £4,000 each year until they're 50. The government will add a 25 per cent bonus to savings, capped at £1,000 each year. Despite house prices soaring in recent years, the LISA is capped for properties at £450,000 - but changes to this may arise in the Spring budget.

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Lewis described the HTB scheme as a more flexible option but says the LISA offers a 'bigger bonus'. He pointed out the 'problem' with LISAs is if you withdraw money from the account before you're 60 years or old, or not to use the money on your first home - you will be penalised by 25 per cent. The expert dubbed this as a '6.25 per cent penalty'.

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For example, if you put £800 in the LISA in one year (assuming no growth) the government will provide a bonus of £200 - bringing your fund to £1,000. However, if you wish to withdraw the full £1,00 from the account, you'll have to pay a fee of £250 - meaning you will have lost £50 of your savings as well as the bonus.

"Once you open a LISA, it has to be open a year before you can get the first time buyer bonus so my big tip to anyone this may be worthwhile for is to get £1 in [the ISA]," Lewis added. You must be aged 18 or over but under 40 to open a LISA. You can learn more about the savings account here.

Liam Gilliver