LISA boost to low-income households but first home still out of reach for many

Tom Selby
9 June 2022

AJ Bell Press comment – 9 June 2022

  • Prime Minister Boris Johnson has today set out details of plans designed to help millions of Brits get a foot on the housing ladder
  • Lifetime ISA and Help to Buy ISA savings could be discounted from Universal Credit eligibility rules to allow low-income households to save for a mortgage
  • In addition, up to 1.5 million working people in receipt of housing benefits could be allowed to use these benefits to meet mortgage costs
  • A review of the mortgage market will also be carried out to assess how people can be given better access to low deposit mortgages
  • Margaret Thatcher’s ‘Right to Buy’ initiative could also be extended to allow millions of housing association tenants to buy their home at a discount

Tom Selby, personal finance expert and head of retirement policy at AJ Bell, comments:

“The Prime Minister attempted to shift focus away from Monday’s dramatic No Confidence vote by turning his attention toward boosting the UK housing market. However, his speech in Blackpool today left as many questions as it provided answers.

“Johnson said he wants to allow up to 1.5 million working people in receipt of housing benefits to have the option of putting these payments towards their mortgage costs.

“Johnson also flagged the possibility of excluding Lifetime ISA and Help-to-Buy ISA savings from Universal Credit eligibility rules. This could potentially mean savings could be built up in either vehicle without impacting on someone’s Universal Credit entitlement.

“Under current rules, anyone with savings worth £16,000 or more does not qualify for Universal Credit.

“This move would give low-income households the opportunity to turbocharge their savings through a Lifetime ISA 25% upfront bonus, giving people a leg-up in saving for a deposit.

“Although it would potentially complicate the savings landscape for those on Universal Credit, who can already open a Help to Save Account offering a bigger government bonus than a LISA.”

Deposit challenges

“However, this is unlikely to be enough to really open up the housing market for most people. Even if the UK market were awash with 95% mortgage deals, on a £200,000 home that still implies a deposit of £10,000, while on a £300,000 property you’re talking about £15,000.

“Being able to save in a LISA might make that more achievable but the target will still remain hefty – and likely out of reach for a lot of people.

“Johnson’s big answer to this is a review of the mortgage market – a useful exercise perhaps but hardly a ready-made, radical solution.

“In reality, with inflation spiralling and interest rates on the rise, lenders are likely to be tightening affordability criteria rather than relaxing their approach to lending. That is unlikely to change just because the Prime Minister says he wants it to. More than anything, the UK needs more homes to be built – and fast.”


  • Lifetime ISA (LISA) allows individuals to save up to £4,000 a year, with stocks and shares and cash accounts available. Accounts must be opened before age 40 but contributions can be paid till age 50. Money can be withdrawn tax-free to purchase a first home or when the account holder is aged 60 or over. Government applies a 25% upfront bonus (i.e £800 saving earns an additional £200 bonus)
  • Help to Save provides a 50% bonus and can be opened by those receiving Universal Credit. The bonus is paid after 2 and 4 years. The account can be held for 4 years with the holder paying in up to £50 per month. There are no restrictions on what can be done with the money when the account is closed after year 4.
Tom Selby
Head of Retirement Policy

Tom Selby is a multi-award-winning former financial journalist, specialising in pensions and retirement issues. He spent almost six years at a leading adviser trade magazine, initially as Pensions Reporter before becoming Head of News in 2014. Tom joined AJ Bell as Senior Analyst in April 2016. He has a degree in Economics from Newcastle University.

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