First-time buyer ISA

Yet another initiative! After Help to Buy, Help to Buy ISA, LISA and now the FTB ISA! Rather than potentially helping this is just causing further confusion for First Time Buyers in an already complex and complicated market. Simplicity and continuity is what is needed in any element of financial planning, not just keep moving the goalposts and reinventing the wheel.

The consultation paper says that the LISA hasn't worked, which I agree.
Apparently the number of unauthorised withdrawal charges is increasing
year on year, reaching 8% of all accounts opened in 2024-25. More
LISA holders have lost a part of their original savings than have
used it to purchase a house. In addition, provider data shows that
thousands of individuals are making multiple unauthorised
withdrawals. It hasn't been used for buying a home, LISA was replacing Help to Buy which also didn't work. Why? the cost of living, mortgage interest rates and people worried about house prices. This has caused them to use the savings they had started out intended for a house purchase. It would be better to lift IHT gifting rules for grandparents for wealth to be passed on more easily., or create more shared ownership opportunities to scale up over time purchasing a whole property rather than in one go.

This is a much better direction than the Lifetime ISA. The LISA tried to be a house deposit account and retirement product at the same time, then punished people for needing their own money when life went wrong. That was always a strange design.

A first-time buyer ISA should do one job well: help people build a deposit without trapping them. Paying the government bonus only when someone buys, while allowing penalty-free access to their own savings beforehand, is far more sensible.

But the detail matters. The property-price cap, annual saving limit and bonus rate are still unknown. If the cap stays too low, it will be useless in large parts of London and the South East.

My biggest concern is the proposed ban on moving money from a stocks-and-shares FTB ISA into cash close to purchase. Buyers need to de-risk when exchange is approaching, not gamble with their deposit.

Simpler is good. Simpler but rigid is not.

A better way to save a deposit is welcome, but it treats the symptom, not the disease. The first-time buyer problem is not only that they cannot save fast enough. It is what they are being helped to buy.

The entry rung, the flat, has become the weakest part of the market. Our Land Registry analysis shows flats fell in value in 22 of 24 towns we studied while houses rose, and the typical flat is now held 9.1 years before resale, up from 2.8 in 2000. So a scheme that speeds people onto that rung can be subsidising them into a home that falls in value and is hard to sell.

Help with the deposit, by all means. But pair it with fixing the entry-level itself: leasehold reform, honest service charges, and an end to flats that trap their owners. Otherwise we are getting first-time buyers through the door of a house that is quietly sinking.

This is a better direction than the Lifetime ISA because it has a clearer purpose: help first-time buyers build a deposit without trapping them if life changes. The LISA tried to be a house deposit product and a retirement product at the same time, which was always an awkward compromise. The principle is sensible, but the detail matters. If the property price cap is too low, it risks being useless in London and the South East. And if it’s too rigid, it becomes another scheme that sounds good in theory but doesn’t work in practice. If the LISA was a hybrid, this needs to be a workhorse.

Replacing the Lifetime ISA is a long-overdue victory for common sense, but the government risks shooting itself in the foot before the new scheme even launches. Scrapping the 25% withdrawal penalty is what hard-working savers deserve as it means young people will no longer be punished just for needing to access their own hard-earned cash when life takes an unexpected turn.
However, Whitehall’s constant tinkering with the savings rulebook has created a real crisis of confidence. Moving the goalposts yet again with a brand-new product for 2028 leaves savers completely exposed to the whims of future governments. If the rules can be rewritten today, there is absolutely nothing stopping a future administration from slashing the bonus or squeezing property caps tomorrow. This endless political meddling risks paralyzing aspiring homeowners, who may choose to stay away entirely rather than trust a scheme that could be ripped up before they even save enough for a deposit.

Despite the government’s claims of simplification let's be honest, the proposed new ISA is a significant downgrade.

Younger savers and first time buyers no.longer receive the bonus at outset. Instead they receive it on purchase but only based on contributions, effectively missong out on all the interest or growth on that bonus compared to a LISA.

A potentially significant saving for the government but a clear cost to savers.

In addition withdrawals are set against contributions when calculating the future bonus. Consequently for those investors with good growth, needing to make future withdrawals before buying their first home, they could end up with no bonus at all despite using the remaining balance of their ISA to buy their first home.

Overall long-term savers could be materially disadvantaged under the new system.