The Government has announced a new First Time Buyer ISA, designed to help people build a deposit and make the route into home ownership simpler.

The new account will eventually replace the Lifetime ISA for new savers and will continue to offer one of its biggest attractions – a 25% Government bonus towards the purchase of a first home.

How will the new First Time Buyer ISA work?

Under the plans announced in the Autumn Budget, first-time buyers will be able to contribute up to £4,000 each year into the new ISA.

When the money is used towards an eligible first home, the Government will add a 25% bonus.

That means:

• Save £4,000 and the Government could add £1,000

• Save £20,000 and the potential bonus would be £5,000

• The maximum Government bonus available over the life of the account will be £20,000

The property being purchased must currently be worth no more than £450,000 to qualify for the bonus. Unlike the Lifetime ISA, however, the new First Time Buyer ISA will have no upper age restriction.

When does the new ISA start?

This is perhaps the most important part of the announcement.

The new First Time Buyer ISA does not launch immediately.

It is due to become available from April 2029, giving banks, building societies and other providers time to develop the new accounts.

So, if you're hoping to buy your first home in the next year or two, waiting for the new ISA is unlikely to make sense.

There are already options available for people saving towards their first home, including the existing Lifetime ISA for those who meet the eligibility rules.

What happens to existing Lifetime ISAs?

Existing Lifetime ISA holders will be able to keep their accounts and continue contributing to them under the existing rules.

The Government has also made an important change for Lifetime ISA savers buying more expensive properties.

From 29 October 2026, somebody using their Lifetime ISA to purchase a qualifying first home costing more than the existing £450,000 property limit will face a reduced withdrawal charge of 20% rather than 25%.

The change is intended to ensure savers can at least retain the value of their own contributions rather than effectively losing part of the money they originally paid in.

Could this help first-time buyers?

Anything that encourages people to start saving towards their first home should be welcomed.

A 25% Government bonus can make a meaningful difference to a deposit, particularly for a couple who are both eligible first-time buyers and are able to build their savings over several years.

However, having a deposit is only one part of getting mortgage-ready.

How much you can borrow will depend on factors including your income, existing commitments, credit history, employment circumstances and the criteria of individual mortgage lenders.

And importantly, you may not need as large a deposit as you think.

There are currently mortgages available for some buyers with deposits of around 5%, while lender affordability rules and criteria can vary considerably.

Planning to buy your first home?

If you're thinking about buying, don't assume that you have to wait until you've built a huge deposit or until the new First Time Buyer ISA arrives in 2029.

Getting mortgage advice early can help you understand:

• How much you may be able to borrow

• How much deposit you realistically need

• What your likely monthly payments could be

• Whether anything on your credit report needs attention

• Which lenders may be suitable for your circumstances

At Chetwood Lloyd Mortgages, we provide independent, fee-free mortgage advice and can help you understand what your route to home ownership could look like.

Even if you're not ready to buy today, having a plan can make getting there considerably easier.

Thinking about buying your first home? Get in touch and we can help you work out your next step.