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Are Proposed First Time Buyer ISA Changes Making the Bank of Mum and Dad Even More Important?

ended 25. June 2026

Scott Gallacher, Director at independent financial advisers Rowley Turton, has questioned whether the Government's proposed First Time Buyer ISA could leave aspiring homeowners more reliant on family wealth at a time when many parents are already under significant financial pressure. 

The Government is consulting on replacing the Lifetime ISA with a new First Time Buyer ISA. While the proposal aims to support home ownership, Scott believes there are important questions about whether it could ultimately leave some savers worse off. 

Under the current Lifetime ISA, the Government's 25% bonus is added as contributions are made and can benefit from years of investment growth. Whereas under the proposed new arrangements, the bonus would only be paid when the property purchase takes place. 

Scott said: 

“The Government says it wants to help first-time buyers, but there are legitimate questions about whether these proposals actually reduce the real value of that support.”

“Under the current Lifetime ISA, the Government bonus can benefit from years of investment growth. Under the proposed system, the opportunity for the bonus element itself to benefit from that growth appears to disappear.”

“Many young people already face enormous challenges in raising a deposit. Increasingly, getting onto the property ladder depends not only on how hard someone saves, but whether their parents are able to help.”

“Those fortunate enough to have access to the Bank of Mum and Dad may still be able to bridge any shortfall. Those without family support could find themselves at an even greater disadvantage.”

“Many parents are already caught in a difficult position. They may have benefited from rising house prices over the years, but they are also being squeezed by higher taxes, frozen allowances, fiscal drag and rising living costs. At the same time, many feel pressure to help children onto the property ladder, sometimes at the expense of their own retirement planning.”

“If these proposals reduce support for first-time buyers, the risk is that they place greater pressure on both young buyers and their parents while making family wealth even more important.”

"It would be disappointing if changes intended to help first-time buyers ultimately left aspiring homeowners more dependent on the financial circumstances of their parents"

Questions for comment:

  • Does delaying payment of the Government bonus effectively reduce support for first-time buyers? 
  • Could some savers be financially worse off under the proposed First Time Buyer ISA than under the current Lifetime ISA? 
  • Are the proposals making the Bank of Mum and Dad even more important? 
  • Will those without access to parental financial support be disproportionately affected? 
  • Is Britain becoming a two-tier property market where family wealth increasingly determines who can buy a home? 
  • Are middle-income parents feeling growing pressure to help children with deposits despite concerns about their own retirement security? 
  • Has fiscal drag reduced the ability of families to support younger generations financially? 
  • Is it disappointing that a Labour government appears to be reducing support for first-time buyers without access to family wealth? 
  • Could the proposals increase financial pressure on both first-time buyers and their parents?
  •  What impact could the changes have on social mobility and intergenerational inequality? 
  • Should policymakers focus on reforming savings products, or tackling the underlying affordability challenges facing first-time buyers? 
  • Are we moving towards a housing market where family wealth matters more than personal saving and hard work?

7 responses from the Newspage community

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Scott Gallacher
Director at Rowley Turton
Had the Government genuinely wanted to fix the Lifetime ISA withdrawal penalty, the solution was relatively straightforward. Reducing the withdrawal charge from 25% to 20% would have removed the risk of savers losing part of their original capital while preserving the benefits of the existing scheme.

Instead, ministers appear to have chosen to spend precious time and resources redesigning the product entirely. The concern is that, in solving one problem, they may have created several others, including reducing the value of support available to disciplined long-term savers.

At a time when the public is increasingly frustrated by a lack of progress on major challenges such as the cost of living, low growth and housing affordability, it is fair to ask whether policymakers are focusing on the right problems.
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Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
The new First Time Buyer ISA fixes one major LISA problem: people would no longer be punished for accessing their own savings when life goes wrong. That is a genuine improvement.

But there is a trade-off. Under a LISA, the 25% Government bonus is paid early and can benefit from years of investment growth. Under the proposed model, the bonus only arrives when someone buys, so that growth opportunity disappears. For buyers saving over several years, that could reduce the real value of support.

That matters because deposits are already becoming a family project, not just a savings goal. The Bank of Mum and Dad should be a bonus, not the deciding factor in who can buy.

The bigger issue is affordability. You cannot solve high house prices, weak wage growth and huge deposits with another ISA wrapper. First-time buyers need better savings support, but they also need homes they can actually afford without parents sacrificing their own retirement.
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Tracey Dixon
Buy-to-Let Mortgage Specialist & Owner at Pure Mortgage and Protection
While any initiative designed to help first-time buyers is welcome, the reality is that affordability remains the biggest barrier to home ownership.
As a mortgage broker, I am increasingly seeing the Bank of Mum and Dad become the difference between buying a home and remaining stuck in the rental market. Many first-time buyers can afford the monthly mortgage payments, but raising a deposit is often the biggest challenge.
Any reduction in the overall value of Government support risks widening the gap between those with access to family wealth and those without it. That creates additional pressure not only on aspiring homeowners, but also on parents who may already be balancing retirement planning with helping their children onto the property ladder.
Ultimately, the biggest issue facing first-time buyers is not the type of savings product available. It is the growing gap between earnings, deposits and house prices.
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Rebecca Robertson
Independent Financial Adviser, Planner and Director at Evolution Financial Planning
The equity release market could set up and support first time buyers by allowing parents to release equity at an earlier age, passing on the equity to children, also reducing their IHT bill.

Alternatively if HMRC allowed gifting for house purchases from grandparents or parents, without the 7 year ruling applying, this would free up capital.

Due to income levels not matching property values, often FTB are pushed out the market. There should be more shared ownership opportunities, allowing those buyers whose mum and dad don't have the resources to provide a deposit, as they can purchase a 25/50/75% shared based on their income mortgage capacity and ability to put a deposit down.
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Jamie Elvin
Director at Strive Mortgages
The concern is that this could make the product easier to explain, while making it less valuable for some first-time buyers in practice. Under the Lifetime ISA, the government bonus is added as the customer saves, so it can benefit from years of investment growth. If the replacement ISA only pays the bonus at the point of purchase, that compounding advantage disappears, and that could leave some buyers worse off over time. From a broker’s perspective, the biggest issue for first-time buyers is still building a deposit. If the new structure reduces the real value of that support, the risk is that it increases reliance on family wealth at a time when the Bank of Mum and Dad is already playing a major role in getting buyers onto the ladder. Ultimately, the test for any replacement product is simple: does it leave a first-time buyer in a stronger position to buy a home? If it is simpler administratively but weaker in terms of helping people build a deposit, that is a problem.
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Kundan Bhaduri
Entrepreneur, Investor and Landlord at The Kushman Group
The Government’s proposal to shift the 25% bonus from the point of contribution to the point of purchase strips away years of compound interest and investment growth on that bonus element. For an average saver building a deposit over five to ten years, this represents a significant financial loss compared to the current Lifetime ISA framework, directly reducing the real-world value of state support.

By making personal savings less efficient, these changes inevitably amplify reliance on the "Bank of Mum and Dad." This exacerbates an already fracturing, two-tier property market where homeownership is increasingly dictated by inherited family wealth rather than individual hard work.

While affluent families will continue to bridge the widening deposit gap, middle-income parents—already squeezed by fiscal drag, frozen tax allowances, and high living costs—face the agonizing choice of depleting their own retirement security to help their children. For aspiring buyers without access to pare
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Jamie Alexander
Mortgage Director at Alexander Southwell Mortgages
There are some genuine improvements in this proposal. Removing the punishing 25% withdrawal penalty that has caught so many savers out is long overdue, and scrapping the upper age limit makes sense given how much longer it takes people to buy their first home now.

But the bonus timing change is worth scrutinising. Under the current Lifetime ISA the bonus is paid upfront and benefits from years of investment growth. Under the new proposal it is paid at the point of purchase, which means savers lose that compounding benefit.

My broader concern is that we are tinkering with a savings product when the actual problem is house prices.