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‘Use them or lose them’ Martin Lewis warns first-time buyers with just weeks left to claim £1,000 free cash
We also reveal how just putting £1 into a savings account could help you in the future
MARTIN Lewis has warned first-time buyers that they have just weeks left to claim £1,000 free cash.
The money-saving expert spoke about the benefits of a Lifetime ISA (LISA) on last night's episode of the Martin Lewis Money Show.
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A LISA is a powerful savings tool for first-time buyers who are looking to get on the property ladder.
The savings account lets you save up to £4,000 per tax year and the state will add 25% a year.
This means that you can get a maximum of £1,000 free cash a year, but if you haven't already you will need to act fast.
If you are thinking about transferring your money into a LISA you will need to do so before the end of the tax year which is April 5.
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A Lifetime ISA can be opened by anyone aged between 18 and 39.
You can use it to save up to £4,000 a year, towards either a first home costing up to £450,000 or for retirement.
It is important to note that savers will need to have the LISA open for a year before being eligible for the 25% bonus.
It is for this reason that Martin advises anyone who has never owned a house to put £1 in a LISA TO "get the clock ticking" on the length of time it has been open.
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He said: "You may as well put a quid in now in case you want to use it in the future, it's great if you have got 18-year-old kids and you want to put money in for them."
Also, if you withdraw the money from the account for any other reason than to buy a qualifying home (up to £450,000) or before you are aged 60, you will pay a fine of 6.25% to access your cash.
Martin was asked by a member of the audience if he thought the government would waive the penalty fee if the house cost more than the qualifying amount.
He said he had asked the Chancellor before the autumn statement and as nothing has changed he intends to "continue to campaign on it".
Martin also advised viewers that MoneyBox has the best rate on a LISA right now at 4.4%.
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Last year thousands of first-time buyers missed out on millions of pounds in free cash by not depositing their savings into a Lifetime ISA.
Data from Moneybox revealed that just 56,100 people bought their first home using a Lifetime ISA in 2022/2023.
This means that out of 300,000 recorded first-time buyers, up to 243,900 could have missed the government bonus offered by saving into a LISA.
This equates to a potential £243,900,000 of "free money" lost in government LISA bonuses in 2022/2023.
More than 18million Brits are currently eligible to open a LISA.
What is a lifetime ISA?
A Lifetime ISA (LISA) is a savings account where first time buyers can stay up to £4,000 cash tax-free each year.
The government will then add 25% bonus to your savings of up to a maximum of £1,000 per year.
You can open a Lifetime ISA with any bank, building society or investment manager that offers the product.
Savers can also hold more than one ISA, although you can only pay into one each tax year.
LISAs are also transferrable so you can move your ISA if you want to get a better rate.
If you do not use your LISA to buy your first home you can continue paying into it until you are 50.
You can then make a full or partial withdrawal when you are 60 without incurring a fee.
How you can find the best savings rates
If you are trying to find the best savings rate there are websites you can use that can show you the best rates available.
Doing some research on websites such as MoneyFacts and price comparison sites including Compare the Market and Go Compare will quickly show you what's out there.
These websites let you tailor your searches to an account type that suits you.
There are three types of savings accounts fixed, easy access, and regular saver.
A fixed-rate savings account offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw but it comes with a hefty fee.
An easy-access account does what it says on the tin and usually allow unlimited cash withdrawals.
These accounts do tend to come with lower returns but are a good option if you want the freedom to move your money without being charged a penalty fee.
Lastly is a regular saver account, these accounts generate decent returns but only on the basis that you pay a set amount in each month.
What types of lifetime ISAs are there?
There are two types of LISAs - a cash LISA and a stocks and shares LISA.
A cash LISA can be worthwhile if you are saving for your first home and are planning to buy within a couple of years.
Interest is paid tax-free on both the amount you contribute and on top of the government's bonus.
As the account is an ISA the interest earned doesn't count towards your personal savings allowance.
A stocks and shares LISA might be more suitable if you are saving over a longer period for retirement.
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This is more complex as investment gains come in as dividends, capital gains and bond interest.
Again, the interest earned doesn't count towards your personal savings allowance.
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