Huge change in new buyers predicted in Budget as Martin Lewis ‘wins’
There could be a HUGE change in the Chancellor’s spring budget, which would mean a big boost for first-time buyers.
Jeremy Hunt has reportedly floated the idea of reducing the Lifetime ISA (LISA) penalty and removing the ownership limit.
Consumer champion Martin Lewis has hailed the anticipated announcement as a major “win” for those looking to get onto the property ladder.
LISAs are savings accounts for people between the ages of 18 and 39 that are topped up by 25% by the government.
They are intended to be used towards the costs of buying your first home or for your retirement.
Anyone planning to spend the money on a first home will have to buy a property costing £450,000 or less or face a 25% penalty.
For example, anyone who had saved €20,000 would receive an additional 25% bonus, worth €5,000.
But if the money were withdrawn for a property worth £450,000 or more, they would currently pay a fine of £6,250, effectively losing £1,250.
As house prices have risen rapidly in recent years, many with LISAs have found they have exceeded the £450,000 limit, leaving them stuck.
However, Jeremy Hunt is said to be considering reducing the penalty rate from 25% to 20% and raising the property limit to £500,000. reports POLITICO Europe.
It means those who bought a home worth £500,000 or more would still have to pay a fine, but it would be 5% less than currently.
For example, someone with savings of €20,000 and a bonus of €5,000 would pay a fine of €5,000 instead of €6,250, meaning they would break even.
Money-saving expert Martin Lewis, who has already called on the government to tackle the problem, labeled the forecast a “win” for first-time buyers.
On X, formerly Twitter, the consumer champion said: “Lifetime ISA win on budget?! Good news!
“If true, this would solve the current system where people who are overpriced and need to buy a house above £450,000 are forced to fine the state to access their money.”
The Sun asked the Treasury for comment.
What is a LISA?
A LISA is a savings account for young people; anyone between the ages of 18 and 39 can open one.
It is intended to be used to buy a first home or for later life, with savers able to add up to £4,000 to an account each year.
For every amount you add to the bill, the government will give you a free 25% top-up. So if you had €4,000 in the pot, you would get a €1,000 bonus.
In addition, you receive tax-free interest on everything you save.
The bonus is paid out every year you save something in your LISA, until you reach the age of 50.
The maximum bonus you can get if you open an account at age 18, add £4,000 a year and then withdraw the money at age 50 is £33,000.
You can withdraw money from your LISA if you are buying your first home, are aged 60 or over, or are terminally ill and have less than 12 months to live.
However, as it stands, you will have to pay a 25% withdrawal fee if you withdraw money for any other reason.
This also applies if you buy a house worth € 450,000 or more.
In other news, a couple revealed how they saved for their first home by opening a Help to Buy ISA.
Additionally, The Sun spoke to a family who used the snowball method to pay off £26,000 of debt and buy their first home.
Do you have a money problem that needs to be solved? Get in touch by emailing money@the-sun.co.uk.
Moreover, you can join us Sun Money chats and tips Facebook group to share your tips and stories.