Darlington Building Society has warned that cutting the tax-free Cash ISA allowance could hit mortgage funding and lower income savers.
Andrew Craddock (pictured), CEO at Darlington Building Society, said the move would have far-reaching effects for mortgage lending, savers, the housing market and the wider UK economy.
Craddock said: “Cash ISAs underpin the UK mortgage market, providing a vital source of funding for building societies, which is lent out as mortgages to support the UK’s housing market.”
He noted that building societies and mutual-owned banks were responsible for 52% of total mortgage market growth in the six months to March 2025.
Craddock added: “By massively reducing this key source of funding, the government would be effectively choking mortgage availability for many first-time buyers and those who struggle to find a mortgage with mainstream high street lenders.
“This can include the self-employed, older borrowers or even those looking to build their own dream home.”
He added that almost half of all Cash ISAs are held by people earning less than £20,000 per year, so any reduction would hit lower income savers most.
He said: “It is disappointing that the government looks set to reduce the tax-free Cash ISA allowance, at a time when we are all working hard to encourage people to build up their financial resilience.
“Cash ISAs are used by those who want to earn interest on their funds without taking the risk of investing and enjoy the benefits of tax-free saving whilst knowing exactly where their money is.
“Most typically, this is older savers and those on lower incomes.”
He added: “By making Cash ISAs less attractive, savers will likely explore other options, and it is difficult to see how building societies could sustain current lending levels if Cash ISA deposits were significantly reduced.
“This would directly impact the mortgage market, with reverberations across the housing market.”
