Would it surprise you to learn that South East London is one of the top 10 first-time buyer Lifetime ISA hotspots in the UK, for the second year in a row?

What about the fact that the number of properties bought in London with the help of a Moneybox LISA increased by 4% last year?

To be honest, it surprised me when I first read it and I work for the largest provider of Lifetime ISAs in the UK! 

Having spent the last 12 months engaging politicians, policymakers and civil servants, campaigning on behalf of LISA savers in the most expensive parts of the country and those just starting on their deposit-saving journey, I’ll admit I have become laser-focused on the urgent need to review some outdated LISA product rules, to ensure what is a fantastic incentivised savings scheme, is future-proofed, so that it continues to be fit for purpose for all those who need it most into the future.

I’m saddened to say that despite many robust proposals, and impassioned pleas from industry bodies, consumer champions, and companies like Moneybox, not to mention from first time buyers themselves,  the Treasury did not prioritise first-time buyers in the recent Spring Budget.

And while it’s reassuring to see that many first time buyers in London were still able to benefit from the 25% government bonus of up to £1,000 each tax year, to boost their deposit savings, it’s imperative that we act now to protect the next generation of homebuyers in London.

The average property price for London, according to Zoopla, currently sits at around £523,400, which is almost double the national average price of £263,600

Moneybox LISA customers who bought a home in London last year paid £356,704 on average for their first home. 

And, while wages in London are typically higher than the national average, they are far from double the national average, and the steep costs of living are felt very keenly in the capital, creating significant affordability concerns for some who wish to settle there.

The Lifetime ISA was introduced in 2017 by the government specifically to encourage more people to start saving for their first home (or for retirement) earlier in life. And by many of these measures, it has already been a big success. The average age of those opening a Moneybox LISA has fallen from 29 to 26 since 2017 and more than 170,000 people the length and breadth of the country, have been enabled to buy their first home, far sooner than would otherwise have been possible, thanks to the Lifetime ISA.

But there can be no doubt that it has become increasingly difficult to become a homeowner in recent years. A recent report revealed that it now takes 9 years for first time buyers in London to save a suitable deposit for their first home – twice as long as someone living in the North East of England. Now consider that the LISA product rules which include a property purchase price cap of £450k, have not been updated since the product was first introduced – even though first-time buyer affordability now varies dramatically across the country. 

We strongly believe that no hopeful first-time buyer should be penalised having saved for so many years, just because they live in one of the more expensive areas of the country. 

As it stands, Moneybox data shows that Londoners pay on average 39% more than any other first-time buyer in the UK. Under current LISA rules, buyers who choose to buy a property that costs more than the property purchase price cap, will incur a 25% government penalty on their savings. While currently, <1% of Moneybox LISA savers have been impacted by the property price cap, I believe the government has a duty of care to address this issue before it becomes a wider concern.  

That is why at Moneybox, we remain steadfast in our call to the Chancellor, to commit to future-proofing the LISA product rules before the election. What first-time buyers need now are pragmatic measures that can be delivered in the near term, offering tangible financial benefits to empower them to navigate the current economic landscape with greater confidence.

These measures should facilitate continued progress towards homeownership goals, recognising that supporting young home ownership can catalyse economic growth, bolster the overall economy, and cultivate a heightened sense of financial security and stability. The ripple effects of such benefits extend beyond the individual, positively impacting broader society.

This article was originally published in the Evening Standard.

 

¹ https://www.zoopla.co.uk/discover/property-news/house-price-index/

A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.