Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property Industry Eye. Read the original article for full details.

Government Proposes First Time Buyer ISA to Replace Lifetime ISA

The government has published proposals to replace the Lifetime ISA with a new First Time Buyer ISA, focusing support exclusively on those saving to purchase their first home. The plans have been welcomed by financial services firms, but industry figures warn that savings products alone will not address the affordability issues facing aspiring homeowners.

Under the proposed changes, the new ISA would remove the retirement savings element of the Lifetime ISA and eliminate penalties for withdrawing funds for non-housing purposes. Savers would receive a government bonus only when the money is used towards buying a first home with a mortgage.

Supporters of the reforms argue that the new product would simplify the savings process for first-time buyers and address criticisms of the Lifetime ISA. However, industry representatives highlight that high house prices and deposit requirements remain significant barriers to homeownership, despite improved access to savings support.

Rebecca William of Rathbones noted that a more focused product could be easier to understand and use, particularly as it removes the withdrawal penalty associated with the Lifetime ISA. However, she also pointed out that the Lifetime ISA provided a tax-efficient way for under-40s to save for later life, and that pensions would likely remain the main vehicle for retirement savings.

The HomeOwners Alliance also welcomed the consultation, stating that the current framework does not reflect the realities faced by today’s first-time buyers. Paula Higgins, CEO of HomeOwners Alliance, said that removing the withdrawal penalty would prevent savers from being penalised for accessing their own money in unexpected circumstances.

For letting agents and inventory clerks, these proposed changes could impact the number of renters able to transition to homeownership, as well as the demand for rental properties. The consultation is ongoing, and further details are expected as the government considers feedback from industry and the public.