Pressure is mounting on the Chancellor to overhaul the Lifetime ISA scheme ahead of the Autumn Budget as new data reveals millions of young Britons are being locked out of home ownership by outdated limits and punitive withdrawal rules.

OneFamily is urging the government to increase the £450,000 property price cap – unchanged since the product’s launch in 2017 – and to revise the 25% withdrawal penalty, which effectively fines savers for accessing their own money.

A survey of 2,000 adults aged 18–40 found that 41% of those without a Lifetime ISA would be more likely to open one if the property cap were raised in line with house price growth, equivalent to around 7.1 million people.

A further 21% of non-holders – representing more than one million potential savers – said the penalty charge was a major deterrent.

The findings highlight growing frustration among would-be first-time buyers, who face rising house prices, higher rents and the lingering effects of the cost-of-living crisis, with many now viewing the Lifetime ISA as no longer fit for purpose.

BIG CHALLENGES

Jim Islam, chief executive of Lifetime ISA provider OneFamily, said: “Hopeful first-time buyers are facing enormous challenges. High property prices, rising rents, and the increased cost of living are making it harder than ever to save for a deposit.

“The Lifetime ISA offers a vital lifeline, giving savers a 25% government bonus that can make a real difference.

“We’ve seen the positive impact LISAs can have on young people’s lives first-hand — in the 2024/25 financial year alone, it helped nearly 90,000 people buy their first home.

“But given the scale of the difficulties they face, it’s clear that more needs to be done. We’re calling for the withdrawal penalty to be adjusted and for the £450,000 property price cap – unchanged since 2017 – to be increased.

“These changes are the right thing to do and would support people in taking that crucial first step onto the housing ladder.”