Recent findings highlight the impact of Lifetime ISAs for those buying their first home
First-time homebuyers utilising a Lifetime ISA (LISA) tend to be, on average, four years younger than those not using the scheme, according to data analysis by mortgage platform Tembo.
It was revealed that in 2023, the average age of first-time buyers who purchased their home with the aid of a LISA was 29, compared to 33 for those who bought without it, with the reduced time to buy contributing to an average saving of £1,500 on mortgage interest for LISA savers.
Tembo’s analysis of data from 3,894 customers who purchased their first home between March 2023 and February 2024 further indicates that one in six first-time buyers utilised a LISA for their first home purchase, with an average of £16,261 saved in their LISAs at the point of purchase.
The amount saved represented 37% of the total average deposit of £43,859, with the remaining £27,598 coming from additional savings or gifts from family.
Read more: How can first-time buyers get on the housing ladder?
Also, the household income for LISA users averaged at £41,336, significantly lower than the £66,000 average income of those not utilising the scheme.
There was a notable difference in the total deposit amounts as well, where non-LISA users had a 42% larger deposit on average, at £62,500, compared to LISA users. The property prices also varied, with homes purchased by non-LISA users being 13% more expensive on average.
Read more: How long will it take first-time buyers to save for a deposit?
Despite the upper house price limit of £450,000 for LISA purchases, Tembo’s broader customer data over the past three years, involving over 35,000 first-time buyers, has shown that 97% bought homes within the eligible price range for a LISA purchase.
The government bonus associated with the LISA has also been highlighted as a key benefit, contributing to significant savings on mortgage costs. For LISA users, the average loan-to-value (LTV) ratio over the past year was 20.1%, including a £3,081 government bonus. Without this bonus, the LTV ratio would reduce, resulting in higher interest rates and additional costs over the initial three-year term of the mortgage.
“The Lifetime ISA is a really effective way for many buyers to reduce the time it takes to purchase their first home,” said Richard Dana (pictured), founder and chief executive of Tembo Money. “With minimal government support announced in the recent budget for homebuyers, the Lifetime ISA offers young people a great opportunity to access much needed additional funds to bolster their deposit.”
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