LISA0120

Written evidence submitted Anonymous

The Lifetime ISA: Our Story and Why Reform is Essential

We, xxxxxx xxx xxxxx and xxxxx xxxxxx xxxxxxxxx, have been living in Walthamstow, East London, for over a year and have proudly called London home since 2021. I work as a xxxxxxxxxxxxxxxx, while Megan is a dedicated primary school teacher at xxxxxxxxxx xxxxxxxx xxxxxxxx in xxxxxx xxxxxxx.

As a couple originally from xxxxxx and xxxxxxxxxxx, we’ve worked tirelessly to build a future together in Walthamstow, a vibrant and family-friendly community. Our dream is to purchase a two-bedroom maisonette in E17, where property prices currently range between £400,000 and £450,000.

We have saved diligently and now have approximately £20,000 in our Lifetime ISAs. While this is a significant amount of money, it is not enough to afford a property in London. The reality we face is that, even as we continue to save for another two to three years to meet our goal, house prices will likely rise, and the dream homes we’ve carefully budgeted for today will be out of reach tomorrow.

The Challenges We Face

Static Price Cap in a Rising Market

The £450,000 LISA cap, unchanged since 2017, no longer reflects the current housing market. By the time we save enough, property prices will likely rise further, resulting in be price out of Walthamstow, and potentially London as a whole.

The Consequences of Being Priced Out

If we can't find a property under the cap, we face two choices:

1. Abandon the LISA and try saving from scratch, which could delay our plans by 5–7 years, keeping us in a cycle of renting and creating an unstable environment when planning to start a family.
2. Leave London, where we’d lose our careers and community, forcing a move back to the Midlands, which would be devastating for us at this stage in our lives.

A Call for Reform

To make the LISA more effective for first-time buyers, we propose:

1. Raise the Property Price Cap to at least £500,000–£600,000, with regional adjustments for high-cost areas, such as London. This we retain the fairness of the limit in other areas where house prices are not as high.
2. Reform the Withdrawal Penalty by reducing or removing the 25% penalty for first-time buyers. At least, in circumstances where the monies were used to purchase a property. There are currently exceptions and I find it unjust that people are paying an effective tax to the Government for purchasing their first property.
3. Protect Buyers from Market Shifts by ensuring the LISA adapts to housing market conditions. The limits on property prices, and maximum government bonus on savings each year (£4,000 annual limit) should be increased by some metric (inflation, house prices, etc). This would future-proof the scheme for a Government committed to home ownership, especially for young people.

Conclusion

The LISA, originally designed to help first-time buyers, no longer meets the needs of today's market. Without reform, we risk being priced out of the life we’ve worked hard to build in London. Our story underscores the urgent need for change to make the LISA a meaningful tool for future homeowners.

January 2025