New alternative ISA to help bring FTB to market sooner
The announcement of the Government’s consultation on a new simpler ISA product for first-time buyers to replace the Lifetime ISA has been hailed as a positive for the mortgage market, helping to potentially bring mortgage-ready borrowers to market sooner. However, there are warnings that the scheme must keep pace with the market.
The government admitted that the LISA wasn’t working as well as it should and said that the new First Time Buyer ISA would have no upper age limit, would pay the government bonus on the purchase of a property and allow savers to withdraw funds more easily.
A positive step
Rachel Geddes, strategic lender relationship director of Mortgage Advice Bureau, said: “The proposed First Time Buyer ISA is a positive step towards helping more people turn homeownership ambitions into reality. While our recent research found that 52% of prospective first-time buyers are hopeful about buying a home, many remain held back by concerns around deposits, affordability and a lack of awareness about the options available to them.
“For the mortgage market, measures that encourage deposit building and improve confidence could help bring more first-time buyers into the market sooner, strengthening the pipeline of mortgage-ready borrowers. Product innovation is important, but our research shows the industry must also address the confidence and awareness gap that continues to prevent many aspiring homeowners from taking their next step.”
Meanwhile, Jasvinder Gakhal, CEO, money at Skipton Building Society, the first to offer the cash Lifetime ISA in 2017, said: “The LISA has helped over 314,000 first-time buyers secure a home of their own, showing how targeted savings support can unlock affordability.
“This consultation is a step in the right direction. Removing the withdrawal penalty, scrapping the upper age limit and reviewing the price cap are all the right calls to create a simpler, more flexible product that works for modern savers.
“But the detail now matters. The Skipton Group Home Affordability Index shows the average first-time buyer home will exceed the current cap in around 10% of local authority areas across Great Britain by the end of 2027. The new scheme must keep pace with the market.”
