Latest news with #LifetimeISAs
Business Mayor
10-05-2025
- Business
- Business Mayor
Tips from first-time buyers: 'We bought a £320,000 home aged 26'
Lucy Acheson Business reporter Cameron Smith Georgia and Cameron saved for nearly three years for their deposit The Bank of England has cut interest rates for the second time this year – welcome news for first-time buyers after years of rising mortgage costs and spiralling house prices. But it's still tough. More than half of first-time buyers still rely on the so-called bank of mum and dad to get on the property ladder, with an average of £55,572 given in loans and gifts last year, according to estate agents Savills. We've spoken to people on a range of incomes who have managed to make it on to the ladder or are on the brink of buying. They shared with us the tactics they used to buy. 'We used a Lifetime ISA' Cameron Smith and Georgia Pickford, both 27, each opened a Lifetime ISA (LISA) in order to buy a three-bedroom flat in Hertfordshire together for £320,000 last year. The scheme allows 18 to 39-year-olds to save up to £4,000 a year, with a 25% government bonus, as long as it's used to buy a home under £450,000. Cameron earns £40,000 and Georgia £37,000 and they each set up a direct debit to their respective LISA accounts. 'Every month, £200 came out of my paycheque – no excuses, no distractions,' says Cameron. In just under three years, the couple saved £27,740, including the government bonus from their LISAs. To reach the full deposit amount, they topped this up with an extra £4,260 from their personal savings. But Cameron says the scheme hasn't kept pace with rising prices. 'The £450,000 cap was set back in 2017 – it hasn't moved. If your property is even £1 over that, you lose the bonus and get hit with a 25% penalty.' Following calls from campaigners for the terms to be updated, the Treasury Committee is reviewing whether Lifetime ISAs are still fit for purpose. Brian Byrnes, head of personal finance at Moneybox, a digital savings and investment platform, still thinks the scheme is a great option for first-time buyers. 'The Lifetime ISA works fantastically well for the vast majority of customers. Less than 1% are impacted by the £450,000 cap,' he says. 'I used an income booster mortgage' Abas Rai, 26, used a type of joint mortgage known as an 'income booster mortgage' to buy his first home – a £207,000 two-bedroom house in Suffolk. Read More Tesla stock downgraded again. Here's how to trade it now It's a product offered by some lenders that lets a family member's income be added to yours, even if they're not living in the property, to increase how much you can borrow. Even with a £30,000 deposit and a £33,000 salary, Abas struggled to get the loan he needed. To boost his affordability, he added his father, who earns £24,000, to the mortgage. By combining their incomes, the bank was able to offer a bigger loan, though it meant his dad would also be liable if he defaults. 'The bank added our incomes together and then multiplied it by 4.5 – that's how they worked out the affordability.' But involving a parent comes with some challenges. 'Because the person added on to the mortgage is also added on to the property, one of the risks was my dad's age – he's 55 and coming to retirement soon, so I won't be able to rely on his salary if I default on a payment.' Abas plans to re-mortgage and remove his dad once his income increases, but says the scheme was worth it. 'If you're not earning above, say £45,000, and you've got someone in the family, I would recommend you go for it.' 'We moved 150 miles to a cheaper area' After years of renting in Oxfordshire, Alex Bonfield, 34, has relocated to Manchester to buy her first home. 'My wife is a teacher and she had to find an entirely new job up here. She really loved her old school, but this was more important,' she says. 'It wasn't an easy decision. We don't know anyone here.' The couple were priced out of buying near family and friends in Oxfordshire, where average house prices are £479,000, compared with £251,000 in Manchester. They began saving five years ago, and are now house-hunting in the £300,000-325,000 range with a deposit of £50,000. 'We're not at the very top of our affordability, but we are quite high up.' They're far from alone. According to Santander UK, 67% of first-time buyers over the past two years have relocated to get on the property ladder. 'I went for shared ownership and a lodger' 'We were tired of doing that dance every year with the landlord trying to hike up rent by stupid amounts,' Oliver says. 'Now we're saving around £1,000 a month compared to our old flat.' Shared ownership schemes let buyers purchase a portion of a property and pay rent on the rest. They're often more accessible but come with complexities, like service charges and limited resale flexibility. Oliver's total monthly costs come to around £1,550, including £500 for the mortgage, £800 in rent on the 75% share he doesn't own, and a £250 service charge. While he and his lodger informally split costs, Oliver covers all the housing payments. 'My mortgage rate is 5.4%, but the rent on the unowned portion is only about 2% of the property value. 'It's cheaper to just own part of the property and pay rent than to buy the whole thing with a big mortgage.' 'The Help to Buy ISA worked for me' Daniel Price, 27, bought a three-bedroom home in the South Wales Valleys earlier this year, not far from where he grew up. He started saving four and a half years ago using a Help to Buy ISA – a government scheme that topped up savings by 25%, up to a £3,000 maximum bonus. It has since been replaced by the Lifetime ISA scheme. 'Originally, my mum told me about it, so I just put a pound in to open the account,' he says. 'I paid in £200 a month and eventually saved £11,000, which got me a £2,500 government bonus.' House prices in the South Wales Valleys tend to be lower than in many other parts of the UK, which can make home ownership there more achievable for first-time buyers. Daniel bought his house for £95,000, below the asking price of £110,000, due to some minor renovations the property needed. 'A lot of houses were out of my price range as a single person, so I started looking further afield.' 'My dad found the house on Rightmove and showed me it. Everything was a bit outdated, but still liveable. It just needs a bit of work to modernise it.' When he first applied for a mortgage in October 2024, Daniel was earning £18,000 a year while doing a software development apprenticeship. By the time the sale went through in January this year, his salary had risen to £24,000. 'I started saving when I was working in a factory as a warehouse manager. I then took up a tech apprenticeship and have just finished it. That helped with my affordability.' 'I bought a fixer-upper' Camilla De Cesare, 32, is a strategy consultant. She managed to buy her first home in London alone, but says it took seven years of living with her parents and being open to buying a property that needed some work. 'My family helped me with the deposit, and I had a stable job, so I was starting from a fortunate position,' she says. Camilla saved and invested a total of £80,000 into the S&P 500, which tracks the performance of 500 leading companies listed on the US stock market. By steadily contributing over time and benefiting from market growth, her investment pot eventually grew to £150,000. 'I was really lucky that the S&P 500, was growing really well over the years that I was investing in it, so it provided me with a really healthy cushion.' She spent £50,000 on her deposit, and the remaining £100,000 will go towards renovations on the property over the coming years, like a new kitchen and bathroom. She says saving for a deposit felt more manageable knowing she could tackle renovations gradually, as and when she could afford them. 'I think when you first get the keys you just want to do it all at once. But there's something satisfying about looking around and knowing you did some of it yourself.' Tom Francis, head of digital advice at financial advisers Octopus Money, says most people would benefit more from 'slow, steady saving'. He encourages prospective buyers to break their spending into three buckets: essentials, desirables and indulgences. 'Think of your dream home as the destination – you can't get there if you don't know where you're starting.' Sarah Tucker, CEO of the financial advice firm The Mortgage Mum, urges younger people not to wait until they've saved for a deposit before seeking financial advice from mortgage brokers. 'There's nothing better than speaking to a professional, even if you're years away from buying.' READ SOURCE businessmayor May 10, 2025
The Sun
24-04-2025
- Business
- The Sun
Complex Universal Credit savings rules mean 2million families miss out on cash
A COMPLEX Universal Credit savings rule is seeing 2million miss out on benefit cash. A new report has found an increasing number of families are having their payments reduced or stopped due to frozen thresholds. 1 Universal Credit is a means-tested benefit which means your income and "capital" is taken into account when deciding whether you qualify and how much you can get. Money stowed away in bank accounts and ISAs as well as any cash you have is classed as capital. But if you breach certain capital thresholds your Universal Credit payments are either reduced or stopped. Have less than £6,000 in capital and you won't be deducted anything. However, if you've got between £6,000 and £16,000 stashed away you will have some Universal Credit taken away while anyone with more than £16,000 is no longer eligible for the benefit. Now, a new report from The Resolution Foundation has found around 2million families eligible for Universal Credit are having their payments reduced because they're breaching these thresholds. The number of people breaching them is rising too, as they have been frozen since 2006 and haven't kept up with inflation. In 2006-08, only 35% of UK families on Universal Credit had capital greater than £6,000, but by 2020-22 that had risen to 45%, it found. Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: "If these (capital) limits are too low, there's a risk people will avoid putting away enough to protect themselves – for fear of losing their benefits. "The fact that the thresholds have been frozen for so long means that someone who simply worked to ensure their savings kept up with inflation could easily have been dragged over a threshold." How does work affect Universal Credit? The Resolution Foundation says the current rules around capital thresholds undermine government savings schemes like Help to Save and Lifetime ISAs. Meanwhile, it says the manner of the thresholds mean those on Universal Credit face a "cliff-edge" of losing some or all of their benefit even if they breach these limits by just a few pounds. Molly Broome, senior economist at the Resolution Foundation, said: "The long-term neglect of the capital rules in Universal Credit means they are now undermining wider Government efforts to encourage low-income families to save. 'Important schemes such as Help to Save and Lifetime ISAs should be exempted from these capital rules so that families doing the right thing by saving into them aren't penalised for doing so. 'And with the Government currently reviewing Universal Credit, it should take the opportunity to index the capital thresholds to inflation, to prevent the system from penalising more families every year." A Government spokesperson said: "We support millions of people through Universal Credit every year, and are committed to reviewing the benefit to make sure it is still doing the job we want it to. "It is important we continue to strike the balance between protecting low-income households and our duty to the taxpayer, and the current thresholds allow people on Universal Credit to continue saving, whilst encouraging them to manage their own day-to-day support." How do the capital limits work? Your Universal Credit payments can be affected by any money, savings and investments you have, known as capital. Any properties you own but do not live in also have a bearing on your payments. If you have capital worth between £6,000 and £16,000, the DWP takes money off your monthly payment. Anyone with capital over £16,000 does not receive any Universal Credit. Your Universal Credit goes down by £4.35 for every £250 you have in capital between these two amounts. Another £4.35 is taken off for any remaining amount that is not a complete £250. So, if you have capital of £6,300, and classed as having £300 in capital over the £6,000 threshold, your Universal Credit is reduced by £8.70 (2 x £4.35 a month). If you have capital of £14,500, you are classed as having £8,500 of capital over the £6,000 limit. Your Universal Credit payments are reduced by £147.90 (34 x £4.35 a month). If you have £17,000 in capital, you do not qualify for Universal Credit. The Government has a list on its website of what it classes as capital. Some of these include cash, money in a bank account, any savings accounts including ISAs, savings for children in your name and more. Any income you've earned, say from salary from a job, is counted as capital if you have not spent it by the end of the assessment period after the one it was received in. You can find out more via You can also use a free calculator to find out how much any capital you've got will affect a Universal Credit claim. Charity Turn2Us' can be found via Are you missing out on benefits? YOU can use a benefits calculator to help check that you are not missing out on money you are entitled to Charity Turn2Us' benefits calculator works out what you could get. Entitledto's free calculator determines whether you qualify for various benefits, tax credit and Universal Credit. and charity StepChange both have benefits tools powered by Entitledto's data. You can use Policy in Practice's calculator to determine which benefits you could receive and how much cash you'll have left over each month after paying for housing costs. Your exact entitlement will only be clear when you make a claim, but calculators can indicate what you might be eligible for. .
