The Building Societies Association (BSA) has called on Chancellor Jeremy Hunt to make changes to the Help to Buy ISA (HTB ISA) and Lifetime ISA (LISA) schemes to support first-time homebuyers.
The BSA has urged the Government to increase and equalise the property price thresholds for both schemes, which have not been updated since their introduction in 2015 and 2017. This would allow first-time buyers to purchase homes within the current market conditions.
The BSA also suggested reducing the penalty for LISA withdrawals to stop savers from having their own cash raided.
The call for change comes as the housing market has experienced significant price increases, and the schemes’ original intention is no longer being met.
The BSA said the Spring Budget, set to take place next month, is an opportunity for the Chancellor to address the issue.
Andrew Gall, head of savings and economics at the BSA said: “Trying to take the first step onto the property ladder is a challenge for most new homebuyers, with our Property Tracker Report regularly showing that saving for the deposit is one of the biggest barriers to achieving this dream. We therefore warmly welcomed the introduction of the HTB ISA and LISA savings accounts when they were launched.
“However, by not regularly reviewing the schemes, they no longer provide the support intended when they were launched. If they are to continue to help first-time buyers, they must keep pace with changes in the housing market.
“Regularly reviewing the threshold in line with house price inflation is the first crucial change needed.
“Whilst the current £450k LISA threshold will be sufficient for many parts of the country, in other areas homebuyers may struggle to find a suitable property at this price point.
“We also want the Government to make LISAs fairer by reducing the withdrawal penalty, so that only the bonus is forfeited for those who access their saving, whether that’s to buy their first home at a price above the threshold, or those who simply need access to their savings – particularly under the current cost-of-living challenges.
“Savers who open an account in good faith, should not be financially penalised if, for whatever reason, they cannot meet the specific requirements of the scheme.”
