Lifetime ISAs help one in ten first-time buyers secure a home

An estimated 11% of first-time buyers with a mortgage utilised a Lifetime ISA (LISA) to facilitate their first home purchase in the fiscal year 2022-23. This figure reflects the growing integration of LISAs into the property buying landscape, according to Hargreaves Lansdown.

In 2023, the number of Hargreaves Lansdown clients who received a LISA bonus increased by 7% from the previous year, with the average bonus amounting to £747. Sarah Coles, head of personal finance at Hargreaves Lansdown, commented on the uptake of LISAs, “One in ten first-time buyers with a mortgage are taking advantage of the Lifetime ISA. It shows how much a part of the landscape it has become since it was first launched seven years ago. However, it has the potential to do even more.”

A significant barrier to wider LISA adoption is awareness. A survey conducted by Hargreaves Lansdown two years ago found that only one in four people knew what the LISA was, and over a third had never heard of it. “If you, or someone you know, is planning to buy a property, getting to grips with LISAs could provide a real head start with building a deposit,” Coles added.

Coles also noted that eligibility rules could prevent some from using LISAs. She advises, “One way to future-proof your finances against this eventuality is to put £1 into a LISA as soon as you’re eligible, so you start the lock ticking immediately.”

The transition from the Help to Buy ISA to the LISA poses another challenge, as both products can be held, but only one can be used for the purchase bonus. Coles suggests that transitioning to a LISA might be beneficial, especially for those looking to buy properties over the £250,000 Help to Buy limit outside London, as the LISA has a higher property cost allowance of £450,000 and permits larger annual contributions of £4,000.

“The proportion of first-time buyers who hold a LISA has been growing every year since they were launched. The number of people paying into an HL LISA and receiving bonuses has risen every year, and in 2023 it was more than 80% higher than in the year it launched. It means that over the coming years, we can expect it to be even more instrumental in getting people onto the property ladder,” Coles concluded.