Record numbers of aspiring buyers max out their LISAs as house prices soar

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on the fact that record numbers of aspiring buyers max out their LISAs (Lifetime ISAs) as house prices soar.

Headlines:

The number of people maxing out their HL LISA allowance by the end of December each tax year has doubled since the first year of the LISA.
Just under a third of people who paid into an HL LISA so far this tax year have maxed it out, and the overall total has hit a record high.
The average amount held in a LISA was always going to grow over the years as more was paid in. However, the average has almost tripled since launch, to over £9,500.
The average withdrawn to buy a property has been steadily rising over time, and hit a peak of almost £18,000 in September last year.

Sarah Coles says:

“A record number of aspiring buyers are maxing out their LISA allowances as house prices soar. Just under a third of people paying into an HL LISA so far this tax year have put in the maximum allowed, in a race to build a big enough deposit as prices threaten to rise out of reach. But while rising house prices make LISAs increasingly valuable, the government needs to increase the limits, so they don’t start limiting people’s options.

“We’re paying more into LISAs than ever. The number of HL clients maxing out their LISA allowance by the end of December has hit a record high in the current tax year, and is more than twice the number that did so in the year that LISAs were launched. Over time, the amount held in the average LISA was always going to grow, as more people paid into them for longer, but it has almost tripled since launch to over £9,500.

“And our enthusiasm for the LISA is paying off. The average withdrawn from an HL LISA to buy a property has been steadily rising over time, and hit a peak of almost £18,000 in September last year.

“But while we’re putting in the effort, we need the government to play its part too, and revisit the LISA limits. The annual allowance has been held at £4,000 for almost five years. And while it’s great that so many people who are saving for a property are taking the opportunity to max out their allowance, it’s also a sign that an awful lot of them would do more if they were allowed to.

“Meanwhile, the limit on the price of a property you can buy using as LISA has stuck resolutely at £450,000. The average house price when the LISA was launched in April 2017 was £220,094. In the most recent month we have ONS figures for (December 2021) it was £274,712. That’s a 25% increase. If the property limit for the LISA had risen at the same pace, it would be £562,500 – over £100,000 more than the current level.

“Setting a fixed limit and then walking away to leave buyers to wrestle with rising prices isn’t good enough. Overall limits need to be linked to house price inflation, so buyers know they won’t be getting into a scheme they could be forced out of by a hot property market.”

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay