Jeremy Hunt is reportedly considering increasing the house price cap on Lifetime ISAs.

Under the current rules, funds from a Lifetime ISA going towards a first property can only be used if the property is worth £450,000 or less.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “A shift in the LISA price cap would be incredibly welcome.

“Runaway house price rises over the past five years have rendered the £450,000 limit much less generous than it was back in 2018.

“While you can still stretch to the average UK property – costing £291,000, Londoners would find the average home well out of reach, at £536,000.”

Funds from a Lifetime ISA can only be used towards buying a property under the price cap or they can be accessed after a person turns 60.

If a person wanted to use savings for another purpose, such as buying a first home worth more than £450,000, they would have to pay a 25 percent penalty on the withdrawal.

Ms Coles said the penalty policy should also be changed and reduced to 20 percent.

There have also been reports the Government is considering creating a new ISA product to help first-time buyers save up.

Ms Coles warned against this, saying: “If the plan is to simplify and streamline the range, adding more different types of ISA risks bringing another layer of complexity.

“The LISA has helped over 171,000 people onto the property ladder, supporting deposits of £2billion. It has also helped hundreds of thousands start their savings and investment journey, forming habits which will help them build their resilience over the longer term.

“That’s not to be sniffed at. The Treasury doesn’t need to throw the baby out with the bathwater. Some tweaks to the LISA will give a huge head start to anyone saving for a property or for retirement.”

The Lifetime ISA comes with the significant benefit that for any amount a person saves, the Government matches this with a 25 percent bonus.

A person can deposit up to £4,000 each tax year into a Lifetime ISA, with a maximum bonus of £1,000 each year.

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