Skipton Building Society said it had seen a 1,384% uplift in the number of Lifetime ISA (LISAs) openings in the first weekend following the announcement of the new version.
Last week the government unveiled details of the new First Time Buyer ISA (FTB ISA) which will replace the LISA and will be scrutinised under a consultation before being formally launched at a future date.
What is the FTB ISA and how does it differ from the LISA?
Much like its predecessor, the new version will be a government-backed account to support savers to buy their first home.
Unlike the LISA, however, the new one will not charge withdrawal fees to savers who take out the money before they have purchased their home.
What’s more, the government bonus – which under the Lifetime ISA (LISA) is paid annually – would be paid when funds were used on an eligible property purchase. This is to address one of the biggest criticisms of the LISA, that many people lost money through ‘unauthorised’ withdrawals.
However, experts last week expressed concerns the proposals lacked details on the contribution limit, property price cap and level of government bonus.
What’s more, the fact the bonus is paid when the savings are effectively withdrawn has raised concerns because it reduced the investment growth potential a regular bonus could provide.
Why are people rushing to invest in a LISA?
According to Skipton, the surge in LISA openings highlights a strong demand from potential first-time buyers for the existing product.
It thought a combination of the heightened awareness of the original scheme, thanks to publicity through the consultation announcement of the new one, would have piqued people’s interest.
Meanwhile, consumer commentary has also played a role. Indeed, Martin Lewis has been encouraging savers to act quickly by opening a LISA to secure current benefits while details of the proposed new scheme remained uncertain.
Alex Sitaras, head of savings and partnership products at Skipton Building Society, said: “The immediate surge in LISA openings shows potential first-time buyers are highly engaged and ready to act.
“It also suggests people are responding to uncertainty around the benefits of any new scheme, while recognising the clear value and momentum behind the existing LISA. This reinforces the continued relevance of LISAs in helping customers build a deposit.”
LISA vs FTB ISA – how they compare
The existing Lifetime ISA allows first-time buyers and those saving for their pension to save up to £4,000 a year tax free and receive a 25% government bonus. It can be opened by anyone aged 18 to 39.
Whilst there is no detail on the upper savings limit the FTB ISA the under-40 age restriction has been lifted meaning it’s open to all aged 18 or over.
Savers can use either cash or stocks & shares versions of the new FTB ISA. The annual cash ISA limit is being reduced from £20,000 to £12,000 for under-65s in April 2027 and, therefore, a cash FTB ISA would be included as part of this allowance.
Skipton, which has more than 160,000 LISA savers, said the product remained firmly focused on homeownership, with just 12% of customers intending to use their LISA purely for retirement savings.
It said whilst it welcomed the direction of the consultation, the detail would be key to ensuring the replacement product remains credible, competitive and aligned with today’s affordability challenges.