First-time buyers missed out on £244m of ‘free money’ by not using savings' scheme

First-time buyers have missed out on hundreds of millions of 'free money' by not using a government-backed savings scheme. New homeowners are being urged to take advantage of the Lifetime ISA (LISA), which is designed to help boost your deposit.

The incentivised savings account helps young people build long-term savings to put towards buying their first home, or save for a comfortable retirement. First-time homeowners aged 18 to 40 can pay in up to £4,000 each year until they reach 50, and the government will add a 25 percent bonus on top of what you've saved - up to a maximum of £1,000 a year.

During the 2022/23 tax year, around 56,100 people got a foot on the property ladder with the help of a LISA, recent data from HMRC shows. But further records show that there were approximately 300,000 recorded first-time buyers in the UK in total.

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That means that as many as 243,900 new homeowners missed out on getting a 25 percent government bonus on top of their deposit - which would have been up to £1,000 of ‘free money’ last year alone.

With saving for a deposit now estimated to take an average of 10 years, had all those who bought their first home last year saved for a deposit with a Lifetime ISA, paying in £4,000 each tax year, they would have had a deposit of £50,000 for their first home, according to Moneybox.

This is made up of £40,000 of direct savings contributions, and an additional £10,000 of ‘free money’ via the government bonus. Depending on whether an they saved into a Cash LISA or invested through a Stocks & Shares LISA, their deposit could even have exceeded £50,000 based on interest rate payments or stock market