The best cash Lifetime Isas: Rising rates mean first-time buyers can now earn more interest – and a 25% bonus

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  • Lifetime Isa savings account rates are rising across the board
  • Top offers currently pay 1.75% with all other rates 1% or higher.
  • Lisas receive a state award but must be used for home or retirement.
  • We are investigating whether Help to Buy Isa users should consider switching

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Interest rates on Lifetime Isa savings deals are on the rise, which will be an incentive for many trying to climb the property ladder.

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The best rate is now earning 1.75%, while just two months ago the best trade was earning only 0.85%.

Those who set aside a deposit for their first home can open a lifetime Isa (Lisa) if they are between 18 and 40 years old. It can also be used to save for retirement.

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Boost: Depositors under the age of 40 can open a lifetime Isa and receive a 25% government bonus.

They can invest up to £4,000 a year and the government will add a 25% bonus to their savings, up to a maximum of £1,000 a year.

This means that for every £4 saved, the government will add £1 up to a maximum of £1,000 each tax year until someone is 50 years old.

Lisa can be used to purchase a first home if the value of the property does not exceed £450,000 and the home is purchased at least 12 months after making the first payment to Lisa.

It is also important that this is their first home and they are buying with a mortgage.

Anna Bowes, co-founder of Savings Champion, says: “It is good to see Lisa rates rising, as is everything else in the savings market, as with interest rates and therefore mortgage rates rising, it will be harder than ever for new buyers. afford your first new home.

“Unfortunately the interest rates offered are much lower than the best rates available on other accounts, but of course the interest rate becomes negligible when you can get a 25% bonus from the government on every deposit you make.

“However, earning interest is definitely the icing on the cake.

“With mortgage rates rising, anything that can help first-time buyers is welcome, so Lisa is likely to continue to be popular.

“What is missing is competition as there are still very few providers offering Lisas. If more providers support this product, we may see higher rates, which would be great for young savers who are trying to climb the property ladder.”

What’s the best deal?

The best deal currently comes from the Nude savings app, designed for those who are saving for their first home.

Cash Nude Lisa pays 1.75% profit making it the most generous deal on the market.

Nottingham Building Society’s Beehive Lisa is the next best deal. It can be opened for £10 and pays 1.3% per annum.

However, there is a snag in Nu’s account. Unlike other providers, it charges a monthly fee of £2.

This means that your annual interest from the £5,000 maximum will drop from £88 to £64 in a year.

However, contributors who choose Nude will benefit from some extra fancy features.

Provider Evaluate %
Nude one 1.75
Hive Money 1.30
Piggy bank (£1+) 1 1.20
Newcastle BS (£1+) 1.20
Paragon Bank 1.00
Skipton Building Society 1.00
(1) Available through the Moneybox app. The tariff includes a fixed bonus of 0.2% for the first year.
(2) Comes with a £2 monthly membership fee.

His Buy Time Calculator helps savers determine exactly how long it will take to buy a home.

Nu says the calculator is interactive and personal to everyone who uses it, allowing them to play with their income and expenses.

Nude also allows savers to connect multiple bank accounts to their Nude app to get a complete picture of their income and expenses in one place.

They can also get personalized money saving ideas based on their spending habits, updated every month according to their income and spending. These ideas were only offered if they could reduce the purchase time by one month or more.

Nude also allows users to team up with someone they shop with, allowing them to see both of their Foxes in the same view so they can track their progress together.

Should Help to Buy Isa owners switch to Lisa?

While the Help to Buy Isa program has now ended, those who opened it before November 30, 2019 will be able to continue depositing funds into their account until November 2029 and receive their government bonus until November 2030.

Help to Buy Isa allows first time buyers to deposit up to £200 per month.

The government then increases their savings by 25 percent – up to a maximum of £3,000 per tax year – when they buy their first home.

It also differs from Lisa in that they can only buy property worth up to £250,000 outside of London with Help to Buy Isa. However, in London the maximum purchase price is £450,000.

For those who have help purchasing Isa, one option is to transfer it to Lisa.

They can invest more in Lisa – £4,000 a year – and the government will add 25 per cent to it.

It also allows them to buy properties up to £450,000 anywhere in the country. However, there are a number of factors to be aware of before switching.

Sarah Coles, personal finance expert at Hargreaves Lansdown, says: “You have to understand the shift mechanism.

“If you have more than £4,000 in Isa Purchase Assistance, you can only exchange £4,000 in each tax year.

“The money that was transferred will eat into your allowance for the current year, so if you spend it all on the exchange, you may have to deposit the money you are saving somewhere else before April next year.

“It might be worth it, but you need to calculate the best approach for your circumstances.

“If you’re worried that you might have to switch, it’s worth thinking about it as early as possible. You don’t have to transfer all the money right away, just depositing £1 will start ticking.”

How Lisa works

How Lisa is used to mortgage the house

When Lisa’s owner buys…

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