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  • Writer's pictureMortgage Tree

Lifetime ISAs are ‘game-changers’ for first-time buyers

Savings and mortgage platform Tembo has looked at the data around first-time buyers who use a Lifetime ISA (LISA) when purchasing their first home.

It analysed data of 3,894 of its customers who bought their first home from 1 March 2023 to 29 February 2024.

Tembo’s data shows that overall, around one in six first time buyers in the last year used a LISA when buying their first property. They had saved £16,261 on average in their Lifetime ISA at the point of purchase. The Lifetime ISA funds accounted for an average of 37% of the total deposit of £43,859. This additional £27,598 was from other savings over and above the annual Lifetime ISA limit or from inheritance and gifts from family.

The average age of LISA home-buyers was 29, while those first-time buyers purchasing a home without using a Lifetime ISA were 33. The profile of the two groups was also quite distinct.

Household income levels for LISA customers is £41,336, whilst for those not using a LISA household income was 60% higher at £66,000.

First-time buyers who are not using a LISA have a 42% larger total deposit (which may also include family gifts) with a total deposit size of £62,500 compared to £43,859 for Lifetime ISA customers.

There was also a difference in average property prices, which were 13% higher for those not using a Lifetime ISA, at £247,000 compared to £217,863 for a Lifetime ISA customer.

Despite concerns around the upper house price limit of £450,000 for Lifetime ISAs purchases, based on over 35,000 Tembo first-time buyer customers over the past three years just 1,140 were purchasing a home for more than the upper limit of £450,000, meaning 97% of customers were buying an eligible home for a LISA purchase.

For Tembo’s LISA customers, the average loan to value over the past year was 20.1% (£43,859 deposit and £174,004 mortgage). The deposit includes a £3,081 government bonus from the Lifetime ISA. If that deposit was removed, the LTV reduces from 20.1% to 18.6%.

Over an initial fixed three-year term, interest rates would increase from 4.59% at 20.1% LTV to 4.89% at 18.6% LTV, equating to an additional interest cost for the customer of £1,577.83 over the first three years of the mortgage

Richard Dana, founder and CEO at Tembo Money, said: “The Lifetime ISA is a really effective way for many buyers to reduce the time it takes to purchase their first home.

“With minimal government support announced in the recent budget for homebuyers, the Lifetime ISA offers young people a great opportunity to access much needed additional funds to bolster their deposit.”


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