How first-time buyers are getting a £50,000 lifetime ISA boost revealed – but there's a catch
Designed to support both first-time homeownership and later-life savings, Lisas offer a significant government bonus. An analysis of authorised withdrawals – those eligible for the bonus – revealed that the top 25 Lisa withdrawals for home purchases averaged £51,000 during the last financial year.
The data further highlights the growing popularity and impact of Lisas. Over 42,800 withdrawals for home purchases were for at least £10,000, with over 11,200 exceeding £20,000.
The Lisa scheme allows individuals to save up to £4,000 annually until age 50, receiving a 25 per cent government bonus on their contributions, capped at £1,000 per year. This incentive makes Lisas an attractive option for those looking to step onto the property ladder.
If savers make withdrawals for any other reason than buying their first home or saving for later life face a withdrawal charge of 25 per cent.
And there is another crucial catch: if someone is using a Lisa for their first home, the property must cost £450,000 or less.
Rajan Lakhani of Plum, which is offering a 4.75 per cent Lisa rate, said: 'Against a backdrop of recent global volatility it's reassuring to know the Lifetime Isa can deliver stunning gains, regardless of the broader economic outlook.
'And don't forget that this Government boost comes in addition to any interest you earn on savings.'
As part of its Lisa launch, Plum has created a digital tool to give savers an indication of how long it could take them to build the deposit necessary for a starter home in their desired postcode.
Speaking to MPs earlier this year, money expert Martin Lewis criticised the Lisa's property price condition, calling it a 'major hole.' This is because, as house prices rise, more first-time buyers are looking to purchase properties over this threshold. But in this scenario, they must give back the 25 per cent 'interest' from their Lisa.
This creates a major issue, he told Treasury Committee in February: 'Many people think that if you add 25 per cent and take off 25 per cent you get back to where you started. You don't. You end up with 6.25 per cent less than where you started.'
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