Numbers using LISA to purchase first home surge by 15,000

Some 50,800 people made withdrawals from their Lifetime ISA to purchase a home in 2021-22, according to the latest statistics from HMRC.

This represents a 15,000 increase on the previous year. The average withdrawal was £13,192 – a £700 increase on the previous year.

Withdrawals from a LISA for any other reason than to purchase a first home worth £450,000 or less or for retirement are hit with a 25% charge.

However, Hargreaves Lansdown has called on the Government review the £450,000 limit in light of recent house price growth and also reduce the penalty to 20%.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “LISAs are playing a vital role in helping people realise their dream of purchasing their first home.

“We saw 50,800 people making LISA withdrawals for this purpose in 2021-22 – a massive 15,000 increase on the previous year. However, reform is needed if more people are to be helped.

“We might be seeing early signs of cooling in the housing market, but this comes off the back of a long period of huge house price growth and for many first-time buyers, particularly in the South-East, the current limit of £450,000 for a first-time home is becoming increasingly difficult to manage.

“Those who purchase a home worth more than this risk being penalised and losing not only their hard-earned bonus but also a chunk of their own savings too.*

“We would ask the government to revise the current £450,000 limit in light of house price rises in recent years and also look at reforming the current 25% withdrawal penalty.

“During the pandemic the penalty was reduced to 20% which meant that people withdrawing from their LISA lost the government bonus but kept their savings. Reinstating the 20% would be a fair approach.”

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