InvestmentsAug 23 2018

Second cash Lifetime Isa enters market

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Second cash Lifetime Isa enters market

The product will be available from 28 August, initially exclusively in-branch before expanding to an online version later this year.

The cash Lifetime Isa (Lisa) can be opened with a balance of £10 and offers an interest rate of 1 per cent AER - customers will also have free access to The Nottingham’s whole of market mortgage service.

The only other cash Lisa currently available on the market is offered by Skipton Building Society, also at a rate of 1 per cent.

Simon Taylor, chief operating officer at the building society, said the product was launched in response to the challenges faced by first-time buyers saving for a deposit in a competitive and crowded housing market.

He said: "As part of our unique proposition, we are also the only society who will search the whole of the mortgage market to find our members the right mortgage for them, offering the potential for even greater savings.

"This service will be free to Lisa savers and further demonstrates our focus on supporting first-time buyers looking at the daunting prospect of their first mortgage."

There is still much more room for education with both Help to Buy Isas and Lifetime Isas...Rachel Springall

In July, MPs on the Treasury select committee called for the abolition of the Lisa - claiming it was too complex and not popular among savers.

The committee’s report suggested the product’s 'perverse' incentives and inconsistency with the long-term savings landscape had contributed to its limited take-up by customers and providers.

A The Nottingham spokesperson said the society remains an advocate of the Lisa, regardless. They said more than 170,000 Lisa accounts have been opened since the scheme’s launch in 2017.

They said: "The Lisa is a genuinely beneficial savings product and we are investing significant sums and resources to make this available to our members - the launch has been much anticipated and the product has been positively promoted by a number of independent consumer champions.

"As with every savings product, there are terms and conditions but these will be fully explained to members wishing to open one and we are expecting a strong uptake."

Rachel Springall, finance expert at Moneyfacts, said it was good to see The Nottingham finally launch its Lisa after a long wait, even if only via their branch network for the time being.

She said: "What is interesting, is their offer to wave a £249 non-member mortgage service fee, which could entice first-time buyers.

"In offering the same 1 per cent interest return as Skipton BS, it shows that whilst Nottingham is in support of savers, there is no real need to offer a higher rate due to the lack of competition."

But Ms Springall said consumers should think carefully about their suitability to a Lisa, amid concern the account could leave them out of pocket if they choose them over saving in a pension, or make a withdrawal down the line and incur penalties.

With the Lisa there is a 25 per cent penalty for withdrawals if consumers take money out early.

Ms Springall added: "With growing scepticism on Lisas by MPs, it remains to be seen whether more providers will feel confident enough to enter the cash market, as so far it has had little interest.

"Perspective house buyers may instead turn to Help to Buy Isas where there is much more choice and better returns - those looking to use a Lisa for the later years may prefer to choose an investment version over cash but must be sure to check in on its performance."

rachel.addison@ft.com