LISA0165

Written evidence submitted by Anonymous

Disclosure -This is my personal point of view as a LISA (Lifetime ISA) consumer and does not represent the views of the organisation I work for.

For context, I am 24 years old and I have had an LISA since I was 18 years old. I have put most of my money that I earnt I earned working part time during my 5 year Integrated Master’s degrees into my LISA as well as money I have managed to save on a 27.5k salary in London.

A huge concern for me personally, is the restrictive nature of the LISA house price cap (£450k for the whole of the UK).In London, the average house price is around £510k (Land Registry, Nov 2024) and for a flat/maisonette it is £422k (Land Registry, Nov 2024). In comparison, for the whole of the UK, the average house price is around £289k (Land Registry, Nov 2024) and for a flat/maisonette it is around £233k (Land Registry, Nov 2024). In addition,  the end of the increased thresholds for paying stamp duty is coming to an end in April 2025 where people now have to pay stamp  duty on properties worth more than £300k which will disproportionately affect first time buyers in London. Previously first time buyers would not pay stamp duty on properties less than £425k.

Previously, in 2022 the LISA house price cap used to be £300k for the rest of the UK and £450k for London where it was then changed to a house price cap of £450k for all the UK. The decision to not change the £450k property cap for London is bizarre and should be increased in order to reflect the current housing market. By having either no cap or a cap that is tandem to the London/not London housing market would be an improvement of the current system.

Below I address some of the reasons why people may object to having a heightened LISA house price cap for properties in London. NOTE: The current HMRC publicly available data on ISA’s and LISAs doesn’t disclose detailed information on who has LISAs ( unlike that of the ISA data).

1. There is a misconception that having a higher LISA house price cap in London will increase house prices in London. A LISA can only be used by people buying their first property. The current cap means that if a person decides to buy in London they might have a lot more limited range than other first time buyers in the rest of the country which drives up demand on those properties. There is also a limit to how much money, one can put in their LISA a year for example an individual can only put a maximum £4,000 a year between the ages of 18 and 40 so this would in turn moderate the demand of certain properties.

On the other hand, the interaction between first time buyers and the private rental market can not be ignored in this context. By making it more difficult first time buyers  to enter the housing market– more people will stay in the private rental market  - putting more demand on the private rented market and in turn the social rental market. People who have saved enough money to put a deposit down should not be limited by a cap. By decreasing the demand on the rental sector would help the London housing market in many ways until drastic changes to housing supply are changed.

2. The misconception that LISA’s just benefit the middle class. If utilised correctly, LISAs can be a great learning tool for people to learn about how to invest their money and save towards a financial goal however little has been done to target people from all backgrounds on the benefits of LISA and is more often than not relying on word of mouth. Improving the sharing of this knowledge would be a great equaliser. It’s a lot better than people’s parents buying their children’s houses for them.

3. People should just not buy in London. Unfortunately, not everyone has the agency to move across the country to buy a house, this is more apparent when the return to office working has a had a massive upheaval in the last few months. Young graduates today have limited choice on where they will have to ultimately start and develop their careers. Labour Force Survey shows that when you look at the proportion of skilled occupations (SOC2020 1-3,5) of employed people by ITL1 region, London is a massive outlier (I.e. London has the most skilled jobs compared to other ITL1 regions) . Young graduates shouldn’t have to choose between developing their careers and having a stable roof above their heads. Tying this back to the huge rents that people pay in London reduces their ability to save for a deposit in any case. By making LISA’s property cap more in line with London house prices, this will reduce the number of years people have to pay their high rents. (NOTE: Fixing this skewed distribution of skilled jobs would take a long time and in the meantime helping people buy houses where they have to work shouldn’t divert the important of improving regional skills gaps)

The last bullet point brings me on to one of the most important points I have to make. Although LISA’s aren’t perfect, they are something. As shown by Pension Policy Institute’s report on Pensions and Housing, they found that the proportion of people in their 40s owning their own house will decrease. In 30-40 years from now, this will cause a massive problem – it’s really important people get on the housing ladder before they retire.

On a more personal note, it is important that I am able to get on the housing ladder if I want to have kids and this unfortunately has a time limit. This government really needs to think about the intergeneration transfer between generations. People my age have to contend with higher student loans (not me – Scottish), fiscal drag, less free services and much higher rents (and house prices) with respect to their salaries.

Although, I am an advocate for LISA’s – it does scare me that I have put the majority of my wealth in this scheme where the rules could be changed (and have been changed)– meaning that the real term value of my money will go down. People at the age of 18 do not know where they will end up living in the UK. First time buyers should not be fined for buying a house regardless of the price.

I understand why there is a penalty but this should not eat into someone’s well earned money. It should just be isolated to the government’s bonus for example if I put £4000 in a LISA and get £1000 from the government but something drastic happens and I need to withdraw my money – I would have to pay 25% of £5000 (£1250) meaning that I lose £250 of my own money.

34% of Brits have 0 savings or less than £1,000 in savings. Britain needs to encourage people to save and not punish them when we do. People’s lives change – there should also be some additional clauses for withdrawing money such as IVF treatment.

February 2025