Martin Lewis gives LISA 'right now' alert to anyone with house worth less than £450,000

Martin Lewis has highlighted the downsides of a Lifetime ISA including a 25 per cent 'penalty' for taking the money out - and for anyone buying a house under £450,000. These products are only available to people between the ages of 18 and 40 and offer some of the same benefits as normal ISAs such as a stock and shares or cash options and the tax-efficiency aspect.

However, the biggest difference between the government-backed product and normal savings accounts is the 25% bonus provided every year. Savers aren’t able to put more than £4,000 into their account every tax year but maxing out this allowance will see them earning £1,000 in bonus cash.

One of the biggest caveats to this product is that Brits can only withdraw their money to buy their first home or for retirement purposes once they reach an appropriate age. The Money-Saving Expert warned that this limitation could make it more of a money-drainer than saver for some people.

He explained on his BBC podcast: “The problem with a LISA is if you take your money out for any other reason you take a 25% penalty.” Doing some on-the-go maths, the expert revealed that if you put in £10,000, the bonus will make your total £12,500. This new figure is what the penalty is based on so you would only be able to get back £9,375, essentially losing £625 or as Martin put it “a 6.25% penalty”.

While these restrictions encourage people to use the account for the exact reasons it was made, Martin highlighted one issue that has slipped through the cracks; first-time buyers can only get their bonus if the house they’re buying is under £450,000, a limit set in 2016 that hasn’t been raised since. The expert explained: “Many people especially in London, the South East and other