The value of Lifetime ISAs to first-time house buyers

Brian Byrnes of Moneybox | Supplied

A Lifetime ISA (LISA) is popular with those looking to save for their first home or retirement. It can be opened by people aged between 18 and 39 and lets them save up to £4,000 each tax year towards a first home or their retirement. The state adds a 25 per cent bonus on top of the amount saved.

But the Treasury Committee recently asked for evidence on whether the LISA is still an appropriate financial product nine years after it was created. The call for evidence closed earlier this month and is now being considered by the committee.

Figures from Moneybox, a savings and investment app, found that Scottish house purchases using LISA savings jumped by 54 per cent last year.

Other findings show that properties bought using LISA savings in Edinburgh had an average value of £253,000. In Glasgow the average value was £205,000. On average, first-time buyers in Edinburgh withdrew £14,568 from their LISA to facilitate their house purchase, which included an average government bonus of £2,701. In Glasgow buyers typically withdrew £13,782 from their LISA, benefitting from an average government bonus of £2,589.

Moneybox said there were six first-time buyers in the Outer Hebrides who used a LISA to achieve their home-buying dreams in 2024.

Cecilia Mourain, chief homebuying and savings officer at Moneybox, says: “Our data clearly shows just how valued the LISA is by UK savers. Not only has this fantastic savings product helped hundreds of thousands of savers get onto the housing ladder, but many have done so much sooner than would otherwise have been possible.

“The wider societal benefits of LISAs cannot be underestimated either. By enabling more people to get on the property ladder earlier and supporting their long-term savings, the LISA plays a critical role in promoting financial security and wealth creation across the UK.”

Brian Byrnes, head of personal finance at Moneybox, added: "For decades, homeownership has been viewed as the cornerstone of financial stability and one of the most effective ways to accumulate wealth due to the potential for equity growth over time. At Moneybox we believe, and see in our data, the positive savings habits that the LISA helps to build and embed—laying the foundation for long-term wealth building.

“To ensure its continued success, we believe future-proofing the LISA is essential. Doing so would give the next generation of first-time buyers the confidence and flexibility they need to save for their first home and beyond.”