Martin Lewis warns of government regulations that give savers less than they paid

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Half a million young savers and first-time buyers risk hefty fines to access their savings under the government’s Lisa scheme, Martin Lewis warned.

MoneySavingExpert’s founder said that if a private company acted in a similar way, it would be “close to deceptive selling”.

The government savings plan for younger starters increases deposits by 25 percent when they are used for a home.

But the £450,000 threshold for a home to qualify has been frozen since the scheme launched in 2017, while house prices in the UK have risen by 35 per cent. If the threshold had risen it would now be £607,500.

It means that savers who cannot find a suitable home below the threshold will be fined 6.25 percent, leaving them with less than they invested.

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Mr Lewis said: “Savers had a legitimate expectation that – six years from now, in the midst of massive house price inflation – under a fair system there would have been some uplift to the maximum house-buying limit.

“Without a lump of face being priced out, having to spend more on a property, and then paying the state a fine to access the money they had set aside for a down payment. Then, to take the biscuit, the fact that they then have a lower down payment can lower the value of the mortgage they are accepted for.

MoneySavingExpert has sent a report to the Treasury and the Financial Markets Authority, asking the government to update the rules.

Mr Lewis said: “The changes we are asking for – either removing the fine for those buying homes that are no longer eligible or raising the threshold, or both – are simple, easy to implement and should cost a relatively small amount to the government. requirements.”

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The consumer advocate website wants the government to raise the threshold to £607,500 and then index it to future house price rises, or lift the fine.

Since its launch in 2017, half a million people aged 18 to 39 have used the savings scheme. Savers can save up to £4,000 a year and receive a 25 per cent boost resulting in a bonus of up to £1,000. However, for many it is now emerging as a false economy, where the only way to avoid punishment is to use the money for a pension instead.

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Jess Rostron, a 38-year-old architect from London, found the plan “disappointing and frustrating” when she was ready to buy last year after saving for it for four years.

She said: “A limit of £450,000 seemed like a reasonable limit for a first home in London when LISA launched, but now it’s not. I feel like I’m trying to use a government program for what it was intended to do, but I’m succeeding not.”

Mrs Rostron had saved £18,800 but would lose £4,700 in capital, interest and bonuses, leaving her £940 worse off than if she had not taken up the scheme. She chose to rent longer rather than buy over the threshold.

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