I face a £1,000 penalty for saving up dutifully

Like every other millennial, the prospect of owning my own home has long been uncertain. Can I afford it? Will I have to move out of London? Can I do it without the Bank of Mum and Dad?

For a long time I, like many of my friends, accepted it was something that was unlikely to happen. But then I got a good job, earned a comfortable salary and found I was saving more than I expected. It was still me versus the housing market mountain, but I was slowly making my ascent, paycheque by paycheque.

To make the most of my savings, I started browsing accounts that would help me get there that little bit faster. A Lifetime Isa seemed like a good idea. It was backed by the Government, which promised to top up whatever I invested with 25pc ( with a maximum annual contribution of £4,000 and a top-up of £1,000). And it came with a sense of security that, in a very insecure housing market, was welcome.

A disclaimer: I’m no markets whizz or property guru. Like thousands of other 20-somethings, I have a full-time job that is a million miles away from the daily intricacies of finance. I spend more time writing about criminal court cases and attending police briefings than I do reading about the ins and outs of the property market. But, like countless other young people, I try to make sense of it where I can, and opening a Lisa seemed to make sense.

That was four years ago. After scraping together the pennies – and teaming up with my partner and his salary – it was finally looking like buying a small, two-bedroom flat in south London was going to be just about possible. And all at the age of 28.

But then I noticed the catch: all the money I had slowly funnelled away into the Lisa could only be used on a property worth £450,000 or less. This has been in place nationwide since April 2017 when the Lisa was first introduced. I was kicking myself.

In five years, the Treasury hadn’t thought it necessary to increase the £450,000 cap – despite the average first-time buyer property price increasing by 16pc in that time. According to figures from Hamptons, 9.4pc of that rise occurred in 2021, as buyers scrambled to navigate the recent price boom.

In the capital, the situation is even worse. The average first- time buyer price has climbed from £411,000 in 2017 to £438,000 last year. If that kind of growth continues, first-time buyers saving with a Lisa will soon be frozen out of the London property market.

To top it all off, the Treasury will now penalise me 25pc to take my money out of the Lisa if I opt to buy a property above the £450,000 threshold. This means it will take money that I have saved off me, not just its top-up. I will have to pay back £5,000, including a penalty of £1,000 of my own savings. This seems a high price for wanting to buy a home with my partner.

This problem is widespread and growing. New data showed that HM Revenue & Customs pocketed £34m in Lisa withdrawal charges in the 2020/21 tax year – three times more than the previous tax year. This is despite the Government reducing the withdrawal charge during this period to 20pc for a year at the start of the pandemic.

I have done everything that the Government told me to do, using its own tools, only to find out I have saved too much – now there’s something I never thought I would write.

Increasing the cap in line with property price growth wouldn’t open the floodgates for cash-strapped millennials to buy palatial London mansions. With the budget most of us are realistically looking at, it’s exciting when we find a property with its own front door. But it would help thousands of first-time buyers strive to achieve what is well within their grasp. It would lift Lisa accounts into the post-pandemic reality and in line with the soaring UK housing market.

The current £450,000 cap is outdated and makes Boris Johnson’s pledge to “turn generation rent into generation buy” completely redundant. After years of battling the jobs market and salary negotiations, navigating mortgage calculators and brokers, I never thought the thing standing between me and owning my first home would be the Government.

Buying your first property is hard enough. The Treasury does not need to make it any harder.

Buyers have to save for seven more months to pull together a 10pc deposit today compared to when the Lifetime Isa was introduced. This problem was most acute in Shropshire, Bath and Oxford (pictured)