Martin Lewis was back at the helm of his self-titled ITV show on Tuesday night (November 1) to give his expert advice on a wide range of topics. The Martin Lewis Money Show Live, which is now in its 12th series, covers everything from mortgages and money-saving tips to help with energy bills in the cost of living crisis.
During last night’s hour-long show, Martin gave his expert advice amid the increasing economic turmoil as he covered the latest in savings accounts and energy prices as well as answering viewer’s urgent questions.
One of the main pieces advice Martin had to give was regarding savings accounts for first-time buyers. As it is becoming increasingly difficult for new homeowners to get a foot on the property ladder, and with house prices constantly rising, Martin had some words of wisdom when it came to saving for your first home.
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Two of the main savings accounts for first-time buyers are the Help to Buy ISA and the Lifetime ISA.
The Help to Buy ISA closed to new applicants in 2019 however if you opened one before then you can save into it until November 2029. With this option, the government adds 25% to your savings with a maximum bonus of £3,000.
An alternative option is the Lifetime ISA which has been available since April 2017. This is designed to help people save for their first home or for retirement.
For the LISA, the government will give you a bonus worth 25% of what you pay in, up to a maximum bonus of £1,000 per year if you save the maximum £4,000 per year.
First-time buyers are often confused as to which account is the best for them, which is what Martin shed some light on during the latest episode of his show.
“One big difference between a Help to Buy ISA and a Lifetime ISA is that with the Help to Buy ISA you can withdraw money whenever you want without penalties.” he explained.
“With a Lifetime ISA, you pay what is effectively a six and a quarter percent penalty if you withdraw the money, unless you are using it to buy a house or later on for retirement.
“As for Help to Buy ISA vs Lifetime ISA that is a big question. You can buy a bigger house with a Lifetime ISA outside London with a limit of £450,000 compared to £250,000 for a Help to Buy ISA.”
(Image: ITV/REX/Shutterstock)
The money-saving expert then continued: “The difficulty is if you’ve got money in a Help to Buy ISA, how do you get it in a Lifetime ISA? You effectively have to take the money out and then put in £4,000 a year.
“So if you are continuing to save in a Help to Buy ISA for a first-time property and you’ve been doing it for years, then you are probably best to stay in there because it’s going to take you a long time to get it into a Lifetime ISA.
“Working out which one is best for you is a bit tricky but if you are definitely going to buy a house that’s under £450,000 rather than £250,000, you may want to start moving it to the Lifetime ISA now.”
An audience member then asked Martin, “With house prices going up and the maximum property limit £450,000, is my LISA even worth it?.”
He responded: “You’re absolutely right, we have seen huge house price inflation. If the LISA limit had gone up with house price inflation then my guess is you’d be able to buy a house over £600,000 now.
“Some people who got LISA’s have now been squeezed out because they need a more expensive property and they would have to pay a penalty to get their money out of a LISA.
“I don’t think that is particularly equitable, I’ve got it on my list of things to campaign about and I’m working in the middle of it.
“If you’re not going to buy a house for less than £450,000 then stop putting any more money in unless you want it for retirement savings because if you want to withdraw that money then you’ll pay a penalty.”
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