Lisa offers savings hope for buyers to reach first rung on the property ladder

IONA BAIN

the top Help to Buy Isa on the market from Barclays, which currently pays 2.25 per cent. Saving the maximum amount into this account both for the first year (£3,400) and the next (£2,400) will earn £131 in interest compared to £34 on the same contributions into the Skipton Lisa.

Those who can stash away larger amounts for longer may want to move into the Lisa before next April, as this would allow you to earn your Help To Buy bonus in May 2018 rather than having to wait for it. But you may want to delay the move until the end of this tax year so you can benefit from a higher Help to Buy rate and also hope for better cash Lisa rates to emerge. Otherwise, you should stick with your Help to Buy Isa and collect your bonus of up to £3,000 when you’re ready to buy.

Remember that you cannot earn a bonus on both accounts and you will forfeit it altogether – plus a further five per cent with the LISA – if you withdraw early.

Anna Bowes, director of Savings Champion, said: “You have to congratulate Skipton on the one hand for offering a cash version of the Lifetime Isa at all, but the interest rate of 0.5 per cent is incredibly disappointing. This is what happens when there is no competition in the market.”

Beyond the short term, you will also have to assess whether prices will soar and ultimately squeeze the value of your Lisa savings if interest rates remain inadequate. Inflation rose to 2.9 per cent in May – the highest level in nearly four years – and Bank of England governor Mark Carney has stated that he remains opposed to hiking the base rate.

Investing in the stock market gives you the best

The new LIsa has already attracted more than 15,000 savers.

chance of beating inflation and returns on cash in the long term.

But you are not guaranteed to get back what you put in and markets can move both up and down – an unnerving thought if you are a first-time investor or buyer.

Steven Cameron, pensions director at Aegon, said first-time buyers nearing their goal may find the stock market “too volatile”.

“Cash-based investments remove the risk of falls in value and are more likely to appeal to those saving for a house deposit,” he said.

“We believe the LISA will appeal primarily to those saving for their first home as employees will almost always be better saving for retirement through a workplace pension with an employer contribution.”