First-time buyers are saving up more than £50,000 to put towards the deposit on their home, new figures have revealed.
Lifetime Isas, also known as Lisas, were launched to help people get their foot on the property ladder.
And new figures from HMRC show the top 25 Lisa withdrawals to buy a home averaged at £51,000 in 2022-23.
The figures were revealed thanks to a freedom of information (FOI) request made by money app Plum.
Rajan Lakhani from Plum, which is offering a 4.75% Lisa rate, said: ‘Against a backdrop of recent global volatility it’s reassuring to know the Lifetime Isa can deliver stunning gains, regardless of the broader economic outlook.
‘And don’t forget that this government boost comes in addition to any interest you earn on savings.’
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The HMRC figures only included withdrawals which were eligible for the government bonus when it provided the figures.
More than 42,800 Lisa withdrawals to buy a home in the 2022-23 financial year were for £10,000 or more, and more than 11,200 of those were for £20,000 or more.
However, there are some catches when it comes to buying property with a Lisa deposit.
If you’ve ever owned a property before, whether inside or outside of the UK, you can’t use a Lisa towards your home purchase – even if it was an inherited property that you sold straight away and never lived in.
And Money Saving Expert Martin Lewis has warned that the £450,000 threshold is a ‘serious hole’ in the Lisa scheme, calling it ‘unfair’ and ‘off-putting’.
What are Lifetime Isas?
Lifetime Isas, otherwise known as Lisas, can be opened by anyone aged between 28 and 39.
They can be used to save up to £4,000 a year, which can either be spent on a first home costing up to £450,000, or for retirement after you hit the age of 60.
The state adds a bonus of up to £1,000 per year on top of that, plus you earn interest on whatever you save, and that interest is tax free.
You must have had your Lisa for at least a year to be able to use it (and the government bonus) towards your first home.
If you use the Lisa to buy a house, you can then keep the account and use it to save money for retirement.
But savers making withdrawals for any other reason than buying their first home or saving for later life face a withdrawal charge of 25%.
The Lisa is an ISA (Individual Savings Account), and you can only pay up to £20,000 into ISAs in the 2025-26 tax year.
Therefore, if you put the maximum of £4,000 into your Lisa, you will only be able to put up to £16,000 into any other ISA accounts.
Speaking to the House of Commons Treasury Committee earlier this year, he said: ‘We have a succession of young people, who are saving in the vehicle they have been encouraged to save in by the state, who are then using, trying to use their savings to buy a first-time property.
‘But, due to house price inflation, their property has just tripped above the £450,000 level. And then, not only do they not get the £1,000 a year bonus they were intended to get, they are fined by the state effectively 6.25% of their own money in order to withdraw that money to get the cash out.
‘When I do television programmes on the Lifetime ISA, I have to warn people about that.
‘And when I warn them about that, because you have to have the caveat “that you should only save in this if you are definitely going to buy a property under £450,000”, instantly we have a huge dropout in the number of people who get it.
‘So, the sentiment that that does is very negative. Generally, in every other way, the Lifetime ISA is potentially superior [than the Help to Buy ISA], but not in that way. And that needs to change.’
Martin suggested the £450,000 limit should be increased to catch up with average property prices and index-linked to house prices, potentially on a regional basis due to wide price disparities across the UK.
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