Bank of Mum and Dad ready to take a break as Lifetime ISAs start to pay off
Leading mortgage provider, Mortgages.Online is forecasting relief for the ‘Bank of Mum and Dad’ as the benefits of the Governments Lifetime ISA initiative, introduced in the April 2017 budget, start to pay off.
Paul Flavin, founder of Mortgages.Online, maintains that the default source of first time buyers mortgage deposits is about to start changing. “The current first time buying generation has become accustomed to their mortgage deposit coming from their parents,” he says, "With the rise in house prices, and the more cautious approach from many mortgage lenders moving away from 100% mortgages, at Mortgages.Online we have seen more and more early buyers relying on the Bank of Mum and Dad as the only option when it comes to finding the deposit.
“With the return of 95% mortgages though, and for those who took out a Lifetime ISA from the 2017 launch date the position is now set to change.”
The Lifetime ISA is available to anyone under the age of 40, and enables the saver to invest up to £4000 a year. Annually the Government adds a bonus of 25%, making it a much more attractive scheme than the earlier Help to Buy ISA introduced in 2015, which restricts investors to £2400 investment a year, and provides a bonus payment of just £3000 compared with a potential bonus of £32000 on the Lifetime scheme.
“Some commentators have highlighted the limitations of the Lifetime ISA, in that the savings can only be taken out either at age 60, or on the purchase of a first home” notes Paul Flavin, “but investors who have saved the maximum of £333 a month for the past two years now have a nest egg of £10,000. With average house prices currently running at just over £200,000, and in many locations substantially below this, we are now seeing buyers able to enter the market again without having to rely on their parents.”
Last week the Nottingham Building Society announced that in the first quarter of 2019 seven times more people have opened Lifetime ISAs compared with Help to Buy ISAs. “Based on these behaviours,” says Paul Flavin, “the Bank of Mum and Dad is set to receive some relief in the years to come.”
ENDS
Notes for Editors:
Contact details:
Paul Flavin:
paul.flavin@mortgages.online
03300586058
07968822606