What Is A Lifetime ISA And How Will It Help Me?
In his latest blog, Trainee Solicitor Michael Radze-Constable discusses what a Lifetime ISA is and how it will help you…
What Is A Lifetime ISA And How Will It Help Me?
In 1960, the average cost of a home was approximately £55,784.00 in today’s money. 63 years later, it now stands at £294,559.00 (over 5 times the 1960 figure)! Prime Minister Harold Macmillan’s 1957 speech, in which he remarked that Britons of the late 50’s “have never had it so good” certainly holds true in illustrating how much spending power an average late 1950’s/early 1960’s income held compared to the modern day. Indeed, The Office for National Statistics illustrates that an average employee’s house would now cost 9.1 times their annual earnings.
Consequently, the next generation of homeowners will find it more challenging than ever to enter, let alone climb the property ladder. Recent interest rates put many homeowners at risk of losing their homes due to increasing mortgage rates. Consequently, a mere mortgage alone may no longer be enough to assist young people in purchasing, and comfortably financing a new home.
Recognising the significant gap between earnings and house prices, financial advisers have started promoting investment vehicles such as Lifetime ISA’s, which can act as a tool to assist in the purchasing of a property.
Lifetime ISA – The Basics
- A Lifetime ISA can be used to either buy your first home or be saved for later life
- You must be 18 or over but under 40 to open a Lifetime ISA
- You can contribute a maximum of £4,000 per year until the age of 50
- The government will provide a 25% bonus to your savings, up to a maximum of £1,000 per year
A Lifetime ISA will not replace the need for a mortgage, however, it can supplement a mortgage to support First Time Buyers. To utilise a Lifetime ISA, the following conditions must be met:
- The property you are purchasing must cost £450,000 or less
- Any purchase must be made at least 12 months after your first initial payment into the Lifetime ISA
- You must use a conveyancer or solicitor to act for you in the purchase. The ISA provider will then provide funds directly to them
- You must be buying with the assistance of a mortgage
Conclusion
While the next generation of homeowners will certainly find it more difficult to enter the housing ladder, Lifetime ISA’s are a useful tool for combating the somewhat harsh and brutal economic climate. At Timms, we have acted for many clients who purchased with the assistance of a Lifetime or Help to Buy ISA. We have noticed a growing appetite for these types of investment vehicles. While solicitors/conveyancers are legally constrained from offering advice on which investment products you should choose, we can offer clear and succinct advice on how you should go about utilising your Lifetime ISA once you are ready to buy your first home.
How We Can Help
For further information on how to use a Lifetime ISA or for details of our conveyancing services, please feel free to contact me on 01283 561531 or via email at M.Radze-Constable@timms-law.com. Alternatively, visit the Conveyancing section of our website here.
Michael Radze-Constable
January 2023