07 February 2024 , 11:04
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“Unfair” penalties around schemes designed to help first-time buyers should be reviewed, according to bodies representing savings providers.
The Building Societies Association (BSA) and The Investing and Saving Alliance (TISA) have called for a revamp of the "unfair" penalties associated with first-time buyer savings schemes. They believe that Lifetime Isas (Lisas) and Help to Buy Isas (HTB Isas), while helpful, need regular updates to stay relevant.
Ahead of Chancellor Jeremy Hunt's spring budget on March 6, the BSA and TISA suggested reducing the withdrawal penalty on Lifetime Isas. Currently, if a Lisa saver buys a home above the £450,000 limit or needs to access their savings for any reason other than buying a home, they face a hefty 25% penalty fee.
This penalty can result in savers losing not only the Government bonus that comes with Lisas but also a significant portion of their own savings. The BSA and TISA propose lowering this fee to 20%, allowing savers to keep more of their own money while still forfeiting the bonus.
Additionally, these bodies are calling for an increase and equalisation of the property price thresholds for Lisa and HTB Isa to £550,000. They also suggest these thresholds should be reviewed annually. Robin Fieth, the boss of the BSA, has called for changes in the upcoming budget to help first-time homebuyers.
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He said: "The budget on 6 March is a great opportunity for the Chancellor to make small changes that would have a big impact for would-be first-time homebuyers." He also said how past support during Covid showed that positive changes are possible: "That shows it can be done. I would urge the Chancellor to reintroduce this on a permanent basis, ensuring the spirit of these savings schemes, which is to encourage young people to start saving to buy their first home, remains intact."
Carol Knight from TISA believes the current system could be more helpful to savers, saying: "The current Lisa framework needs to better serve savers." ATreasury spokesperson highlighted the success of the Lifetime Isa in helping people buy homes and said that they are always reviewing the rules.
The spokesperson said: "The Lifetime Isa helped over 56,000 people get on the property ladder last year and while the average price of a first-time home has increased, it remains below the cap across the vast majority of the country. As ever, we keep all aspects of the savings rules, including the Lisa, under review."
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