Lifetime ISAs boost with free £1,000 every year is now even better with 'rate war'

Moneysavingexpert.com guru Martin Lewis is back with yet another piece of savings advice for people who are yet to step onto the property ladder.

Having recently revealed how we can all avoid next month's 13 percent energy price cap rise, the UK's king of coin has now gone one better by mapping out an unmissable Lifetime ISA boost, earning users a free £1,000 every year until they purchase their first home.

For context, this only applies to those aged between 18 and 39 in Britain, with the property market currently sitting in its worst-ever state for new buyers.

It is said that around 61 to 75 percent of this demographic do not have a mortgage - due to private renting, still living with their parents, or they're embedded in the social housing sector.

Martin Lewis is the mastermind behind Moneysavingexpert.com (HGL/GC Images)

What is a Lifetime ISA?

Lifetime ISAs, or LISAs for short, are tax-free savings accounts and most will agree that they're the best avenue for first-time buyers of a particular age because they bring in thousands of pounds towards a house deposit over a number of years.

You have until your 40th birthday to open one, but they're also just as handy for retirement funds.

Amazingly, a so-called 'rate war' now means that on top of the standard 25 percent boost on savings, there's 5.8 percent interest coming in too.

In his latest newsletter, Lewis noted how just a few weeks ago, the top LISA cash rate was 4.35 percent, which has since welcomed a rise.

Advice From Martin Lewis

"LISAs are a winner for many, yet some, especially in south-east England, need to think carefully before putting real money in one," the 54-year-old wrote.

"That's because house prices have risen substantially in the past few years, but the £450,000 property limit has been frozen since the LISA's 2017 launch. And if you buy a property over that and use your LISA cash, it counts as a withdrawal, so you have to pay the effective 6.25% fine.

"I've campaigned for years for an increase to the property threshold. Plus, more importantly, to scrap the effective fine for first-time buyers purchasing more expensive properties - meaning while they wouldn't get the 25% boost, they'd at least get back the money they put in, plus interest. Those who are priced out still did what they were supposed to, ie, used a LISA for first-time buyer savings, so why FINE them to get their own cash out when they do that?

So far, though, I'm afraid I've failed. Last Dec, I raised this again with the Chancellor as she was talking about launching a new first‑time buyer product to replace the LISA. She told me this would be looked at. Yet the new product consultation was due earlier this year - and so far it's been deathly silence, likely a result of the flux and uncertainty in government. So, who knows what's happening?

For now, LISAs are still the key product. So, while you need to be wary if you think there's a chance you might want to use it to buy a property worth £450,000+, if you're looking to buy a property costing significantly less in the near future, LISAs still look a winner."

What Are Others Saying About LISAs?

As for what everybody else is chattering on the subject of Lifetime ISAs, the UK government has just produced a trio of new key measures for potential account openers to consider before 2027.

Read all about them right here.