Last updated: 26 January 2017
At a glance
- As part of the March 2016 Budget announcements, the Lifetime ISA was introduced. This ISA can be used to save for retirement or to buy a home.
- From 6 April 2017, any adult under 40 will be able to open this new ISA and save up to £4000 each year, receiving a 25% bonus from government on the money saved.
- The limit for property purchased using Lifetime ISA funds will be £450,000.
- Consumers will be able to continue to open a Help to Buy: ISA until November 2016 as planned. They can also choose to open a Lifetime ISA but will only be able to use the government bonus from one of their accounts to buy their first home.
- Once a person turns 60, they can access all their savings, plus the government bonus, tax-free.
The Lifetime ISA (LISA) will be another welcome "boost" for eligible first time buyers.
As the bonus can only be paid once, if a consumer has both a LISA and a Help to Buy ISA, we will be closely monitoring any resulting administrative difficulties.
Why this is important for lenders
This is a further scheme to help first time buyers, as well as encouraging saving for retirement. It recognises the difficulties some are experiencing in saving for a deposit in a very low interest environment.
The Lifetime ISA, like the Help to Buy ISA, allows a consumer to put the bonus towards the balance of their purchase of their first home and therefore there are links between the ISA, mortgage and conveyancing processes, so lenders will want to understand the detail of the scheme and how it may impact on the mortgage process.