Cutting the ISA cash limit could hurt people saving for short-term goals, including first-time buyers, a mortgage lender warned this week.
Yorkshire Building Society has called on the Government to keep the ISA cash limit at £20,000, to support those saving for their first home.
It has sent a formal submission to HM Treasury ahead of the Budget on November 26, when Chancellor Rachel Reeves is expected to cap the amount people can save in Cash ISAs.
Currently, each adult can save up to £20,000 in ISAs and this can be a mix of cash and shares. However, if savers wish, they can invest their entire savings in cash ISAs.
Under the plans, savers can only save £10,000 in cash. The intention is to encourage more people to invest in shares, but critics argue that this will make saving less flexible for many and will also hinder mortgage lending to building societies.
Now Yorkshire Building Society is warning it could also hamper first-time homebuyers’ deposits.
The Society’s submission reads: “Cash ISAs have long been a cornerstone of personal saving in Britain, providing individuals with a tax-efficient incentive to save.
“Simply changing the Cash ISA limit is unlikely to lead to more people investing, but it will hurt people who are saving responsibly for short-term goals when investing is not appropriate.
“Cash ISA deposits support the UK mortgage market and represent a direct investment in the UK economy.”
The mutuality has also called on the government to do more to support home ownership, including home downsizing incentives and a new first-time buyer scheme such as Help to Buy.
It comes as Chancellor Rachel Reeves warned of the challenges facing the UK economy in a Downing Street speech. And she could not rule out tax increases in this month’s budget.
The pre-Budget speculation is also impacting the housing market as potential buyers wait in anticipation of rumors of property tax hikes.
Susan Allen, chief executive of Yorkshire Building Society, said: “As a mutual society, our members come first, whether that is giving them a better return on their savings, helping them overcome the challenges of buying a home or standing up for the things they care about.
“We want the Government to retain the £20,000 Cash ISA allowance as it offers our members a fair, tax-free return on savings in the shorter term. It gives them a safe and stable way to grow their savings while supporting mortgage lending and strengthening the UK economy.
“We also want the government to step up support for aspiring homeowners, especially first-time buyers, and do more to make the housing market work better for buyers, tenants and landlords.”