Martin Lewis addressed the new mortgage guarantee scheme on This Morning today and the Money Saving Expert appeared to not be impressed with the Government’s efforts. Martin warned all this property stimulation could have negative consequences down the line.
“One you have to have already, which is the help to buy ISA and one that you can still open if you’re ages 18 to 39 which is the Lifetime ISA.
“With both of these the amount of money you save towards your first property, got to be a first time buyer…
“….the state will add 25 percent on top.
“Now, in a Lifetime ISA, which is the one that’s available now, you can save up to £4,000 a year in it, and so 25 percent on top of that is £1,000.
“If you’re doing it for three years, then you save the maximum 12 grand in it, you would have £15,000 pounds towards your deposit, an extra £3,000 pounds for free.”
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Martin went on to urge people who aren’t even thinking of a mortgage yet to open a Lifetime ISA where possible: “One of the weird rules in the lifetime ICER is that, to use the bonus as a first time buyer, you have to have had the licence, open for one year, it’s got to have been open a year, only then can you get the bonus.
“So, even if you’re not thinking of this now, if you’re in that age category and you’re a first time buyer, go and open one with one pound, put a quid in there, that gets the clock ticking, and then when you do want to use it in the future you can put your £4,000 in and you’ll get your £1,000 pound bonus, and you can use it straight away because you’ve had it for over a year.
“There is a minor risk on this, that if you take the money out for not buying a house, there is a 6.25 percent effective penalty.
“But, if you’re just talking about putting a quid in there, well a six percent of that is six pence so I think you can afford to lose the six pence for the chance of having the facility.”
It should also be remembered that, uniquely for Lifetime ISAs, the Government bonus can also be used to fund retirement if it is not used for a home purchase.
ISAs of all kinds can be opened and contributed to from the start of each tax year, with the latest beginning on April 6.
Savers can open ISAs with any of the following:
- Building societies
- Credit unions
- Friendly societies
- Stock brokers
- Peer-to-peer lending services
- Crowdfunding companies
- Other financial institutions