First-time buyers in 54 regions of the UK could wind up being unable to use their Lifetime ISA (LISA) to buy an average terraced house in five years as property price inflation pushes more homes above the £450,000 cap.
Some 36 areas are already out of reach for first-time buyers, where a typical terraced home costs more than £450,000, according to analysis by wealth platform AJ Bell of Land Registry data.
But first-time buyers are estimated to be frozen out of a further 18 regions by 2029 if house prices rise in line with the Office for Budget Responsibility’s (OBR’s) forecasts.
Regions already too expensive for LISA account holders include Lewisham, St Albans, Oxford, Enfield, Brighton and Hove and Bromley.
Those areas where terraced homes are forecast to have a price tag of above £450,000 in five years include Sutton, Croydon, Sevenoaks, Waverley and Winchester.
AJ Bell calculates that flats in another six areas of the UK, including Brent and Southwark, could exceed the £450,000 maximum property value in five years’ time.
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There are 11 regions where the average flat already costs more than that threshold.
A LISA can be opened by anyone aged 18-39. The government-backed account attracts an annual bonus of up to £1,000 but can only be used to either purchase a home or for retirement. The maximum purchase price allowed under the rules is £450,000 – a limit that was set seven years ago and has never been revised. Withdrawing cash for any other reason results in a penalty.
Calls for cap increase
AJ Bell is calling on the government to review LISA rules and increase the purchase price limit, bringing it in line with house price growth since 2017 to support buyers onto the property ladder.
Dan Coatsworth, AJ Bell investment analyst, said: “While, in many parts of the country, a typical first home will cost far less than £450,000, large parts of London are already well over the threshold for a terraced house or a flat. Lifetime ISAs may not be designed to help people buy homes in Kensington or Fulham, but Watford and Welwyn surely shouldn’t be off limits.
“Areas including Merton, Ealing and Barnet threaten to become too expensive for first-time buyers hoping to use the government-backed savings vehicle to even buy a flat. For aspiring young people planning to build a career in the capital, it sends out the wrong message if normal commuter areas are effectively frozen out of the government’s flagship first-time buyer savings product.”
