Government must do more to help first-time buyers, says OneFamily
Following the Autumn Statement, OneFamily is calling on the government to go further to support first-time buyers.
While the lifetime ISA has helped thousands of people get on the property ladder, it has remained unchanged since it was first launched in 2017.
We believe two changes are now needed to reflect rising property costs and the cost-of-living crisis:
- We'd like to see the penalty charge reduced to 20% to avoid financially penalising people whose situation has changed since they opened their lifetime ISA.
The current 25% charge on lifetime ISA withdrawals means if people need to access their money, HMRC will charge them more than the bonus it gave them.
- We also believe the property purchase price limit should be higher to reflect increases in property costs.
Lifetime ISAs can currently only be used to buy a property that costs £450,000 or less. But with property prices at record highs, many people are now in a situation where the homes they're viewing are above this threshold, even if they hadn't intend to spend this much when they first opened the lifetime ISA.
Average sold prices for properties in Brighton, for example, are now £515,871.
If a lifetime ISA holder does withdraw money to buy a home worth more than £450,000, they will be charged the 25% government withdrawal charge, which will be more than the bonus they received on that money.
These two changes would provide more support to people, which is particularly important given the cost-of-living crisis. However, neither change was included in the Autumn Statement.
OneFamily's Chief Financial Officer, Jim Islam, has released a statement in response:
"We are pleased the Chancellor has considered ways to support people financially, particularly as the cost-of-living crisis has caused so much stress for many.
"However, we are calling the government to go further, particularly when it comes to supporting first-time buyers.
“The lifetime ISA is an excellent product which has helped tens of thousands of people, but more could be done to support those who want to get on the property ladder.
"We are asking for the penalty lifetime ISA holders pay when withdrawing savings from their account for any purpose other than buying a first home or retirement to be reduced from 25% to 20%. People who have worked hard to put savings aside should not be penalised for needing the money for urgent reasons, particularly during a cost-of-living crisis.
“The £450,000 property cap, which was set in 2017, is now outdated because property prices have risen significantly in recent years. We urge the government to increase the cap so people are not hit unfairly by the penalty and to commit to reviewing this regularly in line with house prices."
- Jim Islam, Chief Financial Officer, OneFamily
Autumn Statement
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