LISA0147

Written evidence submitted by Anonymous

Evaluating the Lifetime ISA's House Price Cap

Summary

The LISA's current house price cap does not align with the contemporary housing market, particularly in high-cost regions such as the south of England. To restore the LISA's effectiveness and geographical fairness reforms could be enacted such as adjusting the house price cap in line with house price inflation or revising the withdrawal penalty. These actions would unlock currently trapped savings for persons like myself for whom by virtue of postcode the LISA has become a pension product which punitively entraps savings for decades, preventing us from using those savings to gain a foothold on the housing ladder.

This submission addresses questions 1, 6, and 8 from the Committee's call for evidence, focusing on the impact of the static house price cap amidst rising property prices in the UK.

Question 1: Is the Lifetime ISA fit for purpose in its current design, including as a combined product for house purchase and pension saving?

While the LISA's dual-purpose design aims to encourage both homeownership and retirement savings, the static house price cap of £450,000 has become increasingly misaligned with current property market realities. Since the LISA's inception in 2017, UK house prices have risen significantly. As of November 2024, HM Land Registry house price index figures show the average house prices of the majority of London Boroughs along with Surrey (£508,491), Cambridge (£502,827), Wokingham (£487,930), Oxford (£474,987), Buckinghamshire (£462,933), Woking (£453,323), Hertfordshire (£451,365), Chichester (£445,437), Bath (£431,155), Brighton (£432,607), and more either exceeded or approached the LISA cap.

As ever increasing volumes of property head north of the LISA cap, LISA holders like myself are prevented from using their savings for the purchase of a first-time home by virtue of the postcode we live and work. This renders the LISA less effective for its intended purpose and turns the LISA into a single-purpose retirement savings product for those of us who reside in the wrong area of the UK.

Question 6: Should the Lifetime ISA be reformed to remove the withdrawal penalty?

The 25% withdrawal penalty for non-qualifying circumstances is intended to recoup the government bonus and deter misuse. However, given the substantial increase in property prices, throughout the regions of the UK, I and other LISA first-time buyers are and will be compelled to purchase homes exceeding the £450,000 cap. Consequently, we face the dilemma of either forfeiting the use of the LISA for first-time house deposits or incurring the withdrawal penalty to access this pot of savings. This situation seems punitive, particularly when the cap has not been adjusted in line with housing market trends.

Reforming the withdrawal penalty, especially in cases where savers are purchasing their first home above the current cap, would enhance the LISA's flexibility and fairness.

Question 8: Should the Lifetime ISA house price cap be raised in line with inflation, or removed?

The static nature of the £450,000 house price cap, unchanged since 2017, fails to reflect the significant appreciation in property values over the past years. Adjusting the cap in line with property price inflation would ensure that the LISA remains a relevant and effective tool for first-time buyers. Alternatively, removing the cap entirely could provide uniform support to all first-time buyers regardless of postcode.

February 2025