Treasury ISA changes could widen deposit gap as 71% of FTBs face delays, warns Moneybox
Moneybox has urged the Treasury to retain and improve the LISA instead of launching another product.
Moneybox has warned that the Treasury’s ISA changes will widen the deposit gap for buyers, with 71% of first-time buyers (FTBs) facing delays in becoming homeowners.
HM Treasury has closed its consultation on creating a new FTB ISA.
The platform said replacing monthly bonus payments with a single payout at purchase would strip £3,606 in compound growth from a typical 10-year saver, reducing their savings from £68,027 under current Lifetime ISA (LISA) rules to £64,421 under proposed rules.
Research from Moneybox found that getting on the property ladder is taking longer than expected, largely due to cost-of-living pressures (47%) and high rents (38%).
Proposed Treasury rules banning transfers from Stocks & Shares to Cash versions as completion approaches leave deposits exposed to market drops.
Moneybox has urged the Treasury to retain and improve the LISA instead of launching another product.
The platform wants an annual review of the £450,000 house price cap so it keeps pace with the market, and for the withdrawal penalty to drop to 20% so savers who exceed the cap keep all their money.
Brian Byrnes, director of personal finance at Moneybox, said: “First-time buyers are already finding it exceptionally hard to save enough to secure a favourable mortgage, with 71% watching their timeline slip and many forced to put major life decisions like starting a family on hold.
“The terms being considered for the new replacement product risk widening this deposit gap further.
“Withholding the bonus until completion takes over £3,600 in compound growth away from a dedicated 10-year saver, while banning transfers to cash before exchange leaves deposits unnecessarily exposed to market volatility.”
Byrnes added: “Rather than introducing a whole new product, the Treasury should evolve the Lifetime ISA to ensure it keeps working for everyone.
“Committing to an annual review of the house price cap and reducing the withdrawal penalty to 20% means savers will never lose any of their hard-earned money – giving future homeowners the certainty and support they urgently need.”
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