Martin Lewis warns first-time buyers with just weeks left to claim £1,000 cash
MARTIN Lewis has warned first-time buyers that they have just weeks left to claim £1,000 free cash.
The money-saving expert spoke about the benefits of a Lifetime ISA (LISA) on last night’s episode of the Martin Lewis Money Show.
A LISA is a powerful savings instrument for starters who want to get on the property ladder.
The savings account can save you up to £4,000 per tax year and the state adds 25% per year.
This means you can get up to €1,000 in free cash per year, but if you haven’t already, you need to act quickly.
If you are considering transferring your money to a LISA, you must do so before the end of the tax year, which is April 5.
A Lifetime ISA can be opened by anyone aged between 18 and 39.
You can use it to save up to €4,000 per year, for a first home costing up to €450,000, or for your retirement.
It is important to note that savers must have the LISA open for a year before they are eligible for the 25% bonus.
It is for this reason that Martin advises anyone who has never owned a house to put £1 in a LISA to “keep the clock ticking” on how long the house has been open.
He said: “You might as well put a pound in now in case you want to use it in the future. It’s great if you’ve got 18-year-old kids and you want to put money in for them.”
If you withdraw the money from the account for any reason other than for a qualifying home (up to £450,000) or before you are 60 years old, you will pay a 6.25% penalty to access to your money.
Martin was asked by a member of the public if he thought the government would waive the fine if the house cost more than the eligible amount.
He said he asked the chancellor before the autumn statement and as nothing has changed he plans to “keep campaigning on it”.
Martin also told viewers that MoneyBox currently has the best rate on a LISA at 4.4%.
Last year, thousands of first-time buyers missed out on millions of pounds of free cash by not putting their savings into a Lifetime ISA.
Moneybox data shows that just 56,100 people bought their first home using a Lifetime ISA in 2022/2023.
This means that of the 300,000 registered starters, a maximum of 243,900 could have missed the government bonus offered by saving in a LISA.
This equates to a potential loss of £243,900,000 in ‘free money’ in government LISA bonuses in 2022/2023.
More than 18 million Britons are currently eligible to open a LISA.
What is a lifetime ISA?
A Lifetime ISA (LISA) is a savings account that allows new buyers to spend up to £4,000 in cash each year tax-free.
The government will then add a 25% bonus to your savings, up to a maximum of £1,000 per year.
You can open a Lifetime ISA with any bank, building society or investment manager that offers the product.
Savers can also hold more than one ISA, although you can only pay into one ISA each tax year.
LISAs are also transferable, so you can move your ISA if you want to get a better rate.
If you don’t use your LISA to buy your first home, you can continue making payments until you’re 50.
You can then make a full or partial withdrawal at the age of 60, without incurring any costs.
How to find the best savings interest rate
If you are trying to find the best savings rates, there are websites you can use that can show you the best rates available.
If you do some research on websites like MoneyFacts and price comparison sites including Compare the Market and Go Compare, you’ll quickly see what’s out there.
These websites allow you to tailor your searches to an account type that suits you.
There are three types of savings accounts: fixed savings accounts, easy access and regular savings accounts.
A fixed-rate savings account offers one of the highest interest rates, but it comes at the cost of not being able to withdraw your money within the agreed time period.
This means your money is tied up, so even if interest rates rise, you can’t move your money to a better account.
Some providers offer the option to record, but this comes with high costs.
An easy-to-access account does what it says on the tin and usually allows unlimited withdrawals.
These accounts usually have lower returns, but are a good option if you want the freedom to move your money without being charged a penalty.
Finally, there is a regular savings account. These accounts generate a decent return, but only on the condition that you pay a fixed amount every month.
What types of lifetime ISAs are there?
There are two types of LISAs: a cash LISA and a stock LISA.
A cash LISA may be worthwhile if you are saving for your first home and plan to buy it within a few years.
Interest is paid out tax-free on both the amount you deposit and on top of the government bonus.
Because the account is an ISA account, the interest earned does not count towards your personal savings allowance.
A stocks and shares LISA may be more suitable if you are saving for your retirement over a longer period.
This is more complex because investment profits come in the form of dividends, capital gains and bond interest.
Here too, the interest earned does not count towards your personal savings deduction.