It points out that the schemes no longer provide the level of support they were initially set up to offer
The Building Societies Association (BSA) has urged the Chancellor to review, in next month’s Spring Budget, two government savings schemes which support aspiring first-time homebuyers.
The association pointed out that the Lifetime ISA (LISA) and Help to Buy ISA (HTB ISA) have not been reviewed since they were introduced in 2015 and 2017, despite significant changes in the housing market.
This meant, the BSA said, that the schemes no longer provide the level of support they were initially set up to offer, and, in some cases, charge savers a penalty which eats into their own savings despite them opening the account in good faith.
The group is asking the government to increase and equalise the Lifetime ISA and Help to Buy ISA property price thresholds to £550,000 with immediate effect, and review them every year. It also wants a reduction of the LISA withdrawal penalty.
The two schemes have already helped hundreds of thousands of first-time buyers get on the property ladder by giving a 25% boost to their savings when they buy their first home. To receive the bonus, the property purchased must be within the price thresholds set in the scheme rules.
However, despite a huge 35% increase in house prices over the last five years, the thresholds on both schemes have remained unchanged. This is preventing some first-time buyers’ from buying a home within the price limits, the BSA stressed.
In addition, if LISA account holders access their savings and buy a property which is above the thresholds, they must pay a penalty payment of 25% of the total savings pot – making them lose not only all of the government bonus, but a chunk of their own savings too.
“Trying to take the first step on to the property ladder is a challenge for most new homebuyers, with our Property Tracker Report regularly showing that saving for the deposit is one of the biggest barriers to achieving this dream,” Andrew Gall (pictured), head of savings and economics at the Building Societies Association, stated in a news release. “We therefore warmly welcomed the introduction of the HTB ISA and LISA savings accounts when they were launched.
“However, by not regularly reviewing the schemes, they no longer provide the support intended when they were launched. If they are to continue to help first-time buyers, they must keep pace with changes in the housing market.”
Gall added that regularly reviewing the threshold in line with house price inflation is the first crucial change needed.
“While the current £450,000 LISA threshold will be sufficient for many parts of the country, in other areas, homebuyers may struggle to find a suitable property at this price point,” he noted.
“We also want the government to make LISAs fairer by reducing the withdrawal penalty, so that only the bonus is forfeited for those who access their saving, whether that’s to buy their first home at a price above the threshold, or those who simply need access to their savings – particularly under the current cost-of-living challenges.
“Savers who open an account in good faith, should not be financially penalised if, for whatever reason, they cannot meet the specific requirements of the scheme.”
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