The first-time buyers’ market is struggling against the backdrop of the cost of living crisis, rising house prices and increased mortgage rates.
It is not surprising that young adults, who are struggling to meet their rent and rising fuel bills, are telling us that buying a first home has dropped far down on their to-do list.
Research that OneFamily has undertaken suggests that less than a third of under 40s are prioritising getting on the housing ladder – they are simply trying to make ends meet.
Yet there is an existing financial product that could help to kick-start the first-time buyers’ market and give young adults some hope. But it does need some tweaks to make it more appealing to its target demographic.
And if these small changes could be made during the Autumn Budget it might be just what millions of prospective buyers need to nudge them into home ownership and away from the uncertainty of renting.
So, this is the point where the lifetime Isa should be riding in to save the day. It’s a superb investment account, helping young people to grow their savings and they can earn a bonus of up to £1,000 a year on up to £4,000 saved. Who would not want free money when times are tough?
And when the bonus was explained to them, 70 per cent of the young people we surveyed said that they had considered the account. So far, so good.
Challenges to overcome
But, unfortunately the Lisa does not quite fulfil its brief. There are a couple of fundamental problems that we have been campaigning for change on for some time.
Our customers have pointed out to us that the big flaw in the structure of the account is that if they have to dip into their nest-egg in an emergency – which happens in the real world – then they are hit with a hefty penalty of 25 per cent.
This does not just wipe out the bonus that they have earned – which is reasonable to expect – but it also takes a sizeable bite out of their hard-earned savings too.
And in the middle of a time of financial uncertainty, who on earth would want to take a risk like that? Nearly one-quarter of those who would not consider a Lisa said that it was not being able to access their savings in an emergency that had put them off opening an account.
Meanwhile, there is another issue. The rising cost of homes means that the 2017 cap that was put on the cost of the property that could be bought with a Lisa – £450,000 – is completely outdated. It is a lot of money, but when you look in estate agents’ windows in city centres or the south of England, it really does not go very far.
