Every month, Calvin Kern sees a significant amount of his income swallowed up by his rent, even though he is house-sharing with three other people.
The 23-year-old is determined to buy his first home by the age of 30 and has recently opened up a stocks and shares Lifetime ISA to help him save his deposit.
However, he told The i Paper the rules around Lifetime ISAs need to change as they are “too harsh.” The current price cap for those looking to buy a home with such an ISA is £450,000, which Mr Kern says is too low, particularly for people looking to buy their first home in London.
“I think the Government should change the current penalty system so that Lifetime ISA account holders who take the money out for something other than buying a home or retirement lose the bonus, but they don’t lose their own savings,” he said.
“The penalty was a factor when I was considering opening a Lifetime ISA, but because I chose a stocks and shares ISA and I’m looking to save for seven years, I felt it was worth doing.
“But it’s not fair for people to lose out on their own savings. Removing the fear of this will incentivise people to open a Lifetime ISA. It would create motivation by getting people to invest more by removing the threat of losing out.”
The Lifetime ISA allows people to save up to £4,000 a year and receive a 25 per cent top-up from the Government. However, the Lifetime ISA only allows savers to withdraw this money to either buy their first home, up to the value of £450,000, or for retirement when they reach 60.
If people withdraw the money for any other reason, it results in a penalty charge of 25 per cent on the whole sum, meaning savers lose some of their own money as well as the Government bonus.
New research carried out by Opinium on behalf of OneFamily reveals that if the Lifetime ISA price cap were increased in line with the growth of property prices, 41 per cent of 18 to 40-year-olds without a Lifetime ISA say they would be more likely to take one out.
Mr Kern said: “The current price cap of £450,000 might seem a lot for a property, but in London, that can be the starting price for a two-bedroom apartment.
“People feel they can’t afford to have children and most of my friends think they will never be able to buy a house.
“Essentially, wages are too low and house prices are too high. I think it would be good if the price cap was increased to around £600,000.
“I think the Government needs to take a hit now by putting in major investment into opportunities for young people to create motivation and drive, so they feel these life goals are possible.”
Mr Kern lives in a house-share in Stratford, London, with his girlfriend Erin Howard and two friends. The four of them are paying around £980 a month for rent and bills, so he is keen to save up a deposit so he and his girlfriend can buy their own home. Currently, the rent for the four of them sharing is £3,350 a month and the bills come up to around another £500 a month.
“People face a lot of barriers when it comes to buying their first home these days,” he said. “My dad bought his first property at 24 and my friend’s parents never rented as they were able to buy young.
Mr Kern with his girlfriend, Ms Howard“But that would be almost impossible now as house prices have been going up and up and wages haven’t increased in the same way.”
Mr Kern, who studied business at university, has two jobs as he works in social media and also has a job in events. Music is his passion and he is a guitarist in a band.
He grew up in Bournemouth and says that while he and Ms Howard would like to buy a flat in London, due to it being so expensive, they may have to look outside the capital instead. However, he says even in Bournemouth, where his mother lives, the cheapest one-bedroom flats are around £200,000.
“I only opened my Lifetime ISA a few months ago, but my plan is to max it out with £4,000 every year so I can get the full Government bonus of £1,000.
“I want to buy a house when I’m 30. I am planning ahead so I can make that happen. I’ve also opened another stocks and shares ISA and have an easy-access savings account, so I can build a safety net of two or three months of my income.
“I’m saving in a way that should allow me to afford to buy by myself in about seven years, but I would like to be able to get my first home with Erin, so if we can, we will hopefully do that.
Your next read
square MONEYWe were hit with a £148k inheritance tax bill when mum died at 97 – it’s disgusting
square MONEYI worked hard for my £1m five-bedroom house – a mansion tax is a jealousy tax
square PROPERTY AND MORTGAGES Money ClinicI fear my £2k-a-month mortgage will be unaffordable if taxes rise. What can I do?
square PENSIONS AND RETIREMENTRetirees on the full state pension set to pay back £200 winter fuel payment in tax
“By 30, ideally, I’d like to have about £35,000 saved up and my girlfriend would have around £20,000 saved. That would give us a £55,000 deposit. If we both had jobs where we were earning around £40,000 each, we might be able to buy somewhere priced at around £400,000.
“I really don’t understand why the Lifetime ISA has a price cap in the first place, but I think it is something that definitely needs to be tackled now and made higher.
“I also think it’s harsh that the penalty for taking out the money for anything other than a first home or retirement gets applied to the entire pot and I believe this needs changing urgently.”
Hence then, the article about i m 23 and want to buy a home but lifetime isa rules mean i could lose my own savings was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( I’m 23 and want to buy a home, but lifetime ISA rules mean I could lose my own savings )
Also on site :