LISA0157
Written evidence submitted by Anonymous
Thank you for setting up this call for evidence and taking views from consumers – this is a policy area which I have been following closely for the past 18 months and which I am keen to see some reform on, through fear of losing some of my savings I have built up in my journey to try to become a first-time homeowner.
I am 26 years old living in south-west London, and I am looking to buy my first home in the next 12-18 months. I have been saving carefully over the past 4 years since I started work, and am starting to get into a position where I may be able to afford a house deposit, be eligible for a sufficiently large and affordable mortgage, and have surplus savings to cover the numerous additional costs which the process of buying a home will incur.
As part of this savings journey, this is my fourth year of having a lifetime ISA – I have saved the maximum amount into the savings product for the past 3 years, and I am considering whether to do the same in the 2024/25 tax year. For me personally, I think it is a great savings product, with strong incentives to save and invest money, and receive additional support through the HMRC 25% bonus. It has been a nice additional boost each year on my way to feeling ready to make the leap into home ownership, and I have sought to maximise it at the expense of other savings and investment options.
However, as the reality of buying a house has come closer and I have scoped out the housing market, I have realised the potential limitations of a £450k property price limit, particularly in London. This is the 9th year of the product being in existence, and the fact that house prices in London in that time (according to https://www.statista.com/statistics/286006/monthly-average-mix-adjusted-house-price-in-london/) have risen by 14% without any corresponding adjustment in the property price limit feels strange. The limit would sit around the £513k mark if it had gone up by the same levels (calculations using inflation may have a different figure but a relatively similar effect). This has contributed to some of my stress and uncertainty around the use of the LISA as a savings product.
The main compounder of this stress has been the withdrawal penalty, which I feel is somewhat arbitrary, punitive, and a disincentive to save through the scheme. Looking at the housing market, what I will be able to afford via my savings and a mortgage, and my search crtieria, it feels likely that my ideal property will fall in the £450k-£515k mark. Again, if the maximum property price had increased over time, or reflected the house price disparity between London and other parts of the UK, this would be okay, however under the current rules this would disqualify me from using my LISA savings.
If this static £450k limit were deemed an adequate and just measure of who should be eligible for the policy based on their housing affordability then that is understandable, albeit frustrating. However, to subsequently punish me (and other savers) by including a withdrawal penalty on my own savings does not feel right or just. There is no way that I could leave the money in the account to save for a pension – I’m about 40 years off being able to do that, and I would need the >£15k currently sitting in the LISA for the deposit. As such, I would lose some of the money I have saved, just through an initial miscalculation of what I would be able to afford after years of saving to buy a house and an assumption that I would be eligible to use the product for a deposit.
I have checked the updates on this policy at each Budget and Autumn Statement since it has been highlighted as an issue by Martin Lewis, and I have twice written to my MP, who has raised it with the relevant ministers and shared their responses, which I have found unsatisfactory. The uncertainty about 25% of one of my key savings pots, and the prospect of losing some of my own savings as a penalty (as one of my close friends experienced), is the source of some stress and anxiety, which is not helpful in an already stressful homebuying journey. As such, I would be strongly in favour of at least one of the following two suggestions:
Please feel free to contact me for any follow-up questions on anything I have said.
February 2025