We’re making updates to our systems on Saturday 8th May and some of our CTF and Junior ISA online functionality may be unavailable. Thanks for bearing with us, we’ll be back up and running as soon as we can.

5 min read

Nearly £7 billion a year in free Government funding left untouched by first-time buyers

Posted in: Corporate

  • 4 million 18-39-year olds plan to buy their first home in the next ten years
  • If they invested in a Lifetime ISA and took advantage of the guaranteed government bonus, generous funding of £1,000 would be given to each first-time buyer every year
  • Despite this only one in twenty (6%) 18-39-year olds are using a Lifetime ISA
  • Lack of awareness amongst target market with 55% of eligible first-time buyers saying they had never heard of a Lifetime ISA or don’t know what it is

OneFamily research has revealed of the 7.4 million first-time buyers in the UK eligible for a Lifetime ISA[i], only one in twenty (6%) are taking advantage of the additional £1,000 savings top-up a year being offered by the Government.

The Lifetime ISA was introduced to replace the Help to Buy ISA and help first-time buyers, between the ages of 18 and 39, to get on the property ladder. A maximum of £4,000 can be saved each year and the Government will top this by 25%, up to £1,000 a year. If all eligible first-time buyers took a Lifetime ISA and paid in the full amount, the bonuses paid by the Government would be £7.4 billion every year.

The low uptake is being driven by a lack of awareness with over half (55%) of 18-39-year old first-time buyers saying they had never heard of the Lifetime ISA or if they had heard of it, they didn’t know what it was.

This doesn’t mean that first-time buyers aren’t saving however. Despite ongoing low interest rates on cash savings, nearly half (45%) are using a standard savings account, one in five (21%) are using a Help to Buy ISA and one in ten (13%) are using a cash ISA. With the average house in the UK costing £227,000[ii], to save a 20% deposit of £45,000 first time buyers need to make their money work hard.

Over the last five years average interest rates on cash savings accounts have returned 6.88%[iii], while money invested into OneFamily’s main investment fund has returned 42.6%[iv].

Nici Audhlam-Gardiner, Managing Director of Lifetime ISAs comments:

“The Lifetime ISA should be a no-brainer for first-time buyers, as there isn’t a product that competes with it for the bonus you get back on your savings, plus the potential investment returns. First-time buyers can also use it for that all-important house deposit, which is one of the biggest flaws with the Help to Buy ISA, as savings can only be accessed after completion.

“This research shows that millions of first-time buyers aren’t making the most of the generous bonuses on offer to them at no cost, and are losing out on additional returns by saving in cash.”

The average time first time buyers expect to save for a first home is six years. If they invest the full amount of £4,000 each year into a Lifetime ISA, with the government bonus added, they will have a saving pot of £30,000. Add a stocks and shares potential investment return of 5% per year and they would have over £36,000 to put towards a first home.

To find out more about OneFamily’s Lifetime ISA visit: https://www.onefamily.com/lifetime-isa/

[i] There are 52,465,000 adults age 18 and above in the UK. 17% plan to buy a property in the next ten years = 8.919,050. 83% of these are between 18 – 39 so could use a Lifetime ISA = 7,402,811.50. 6% are using a lifetime ISA leaving 94% who are not = 6,975,562 = £6.9 billion left unused. OneFamily research 2018
[ii] UK House Price Index, April 2018
[iii] http://www.swanlowpark.co.uk/savings-interest-annual 2013 – 2017
[iv] Family Sovereign Fund growth of 42.6% 2013 – 2017