Saving for a house deposit has always been one of the biggest hurdles for first-time buyers, and in today’s market, it can feel harder than ever. With house prices staying high and the cost of living stretching budgets, buyers are looking for smarter ways to build up their savings. One option that’s become increasingly popular in 2025 is the Individual Savings Account (ISA) – and, in particular, the Lifetime ISA (LISA), which offers a government bonus that can seriously boost your deposit.
Recent figures show a record number of new ISA accounts being opened this year as savers hunt for better returns and tax-free growth. With interest rates on cash ISAs improving after years of being rock-bottom, many people are moving their savings away from standard accounts into ISAs. For first-time buyers, this is an opportunity not to be missed. Unlike a regular savings account, the interest earned in an ISA is completely tax-free, which means your money grows faster. The Lifetime ISA takes things one step further by adding a 25% government bonus to your savings – up to £1,000 every year if you save the maximum £4,000. That’s essentially free money towards your deposit.
| Feature | Details |
|---|---|
| Who Can Open | Anyone aged 18–39 (must open before 40) |
| Maximum Yearly Deposit | £4,000 |
| Government Bonus | 25% of what you save (up to £1,000 per year) |
| Total Possible Bonus | Up to £33,000 if you contribute from age 18 to 50 |
| Property Value Limit | First home must cost £450,000 or less |
| Penalty for Early Withdrawal | 25% charge if not used for first home or retirement |
| Use with Partner | Both buyers can have a LISA, effectively doubling the bonus |
| Best For | First-time buyers aiming for a 5–10% deposit |
The Lifetime ISA was designed specifically to help first-time buyers and those saving for retirement. Here’s how it works. You can contribute up to £4,000 each tax year, and the government will add 25% on top of whatever you save. To open one, you need to be between 18 and 39 years old, and the funds must be used to buy your first home, which must be priced at £450,000 or less. If you take the money out for anything other than buying your first home or retirement, there’s a 25% withdrawal penalty, so it’s important to be sure before you dip into it.
For example, if you save £4,000 in one year, the government will top it up to £5,000. Over two years, that’s an extra £2,000 towards your deposit without you having to do anything other than save regularly. And if you’re buying with a partner, the benefits can be doubled. Both of you can open a Lifetime ISA and save £4,000 each per year, giving you a combined £8,000 in savings plus a £2,000 annual bonus. In just three years, you could build a deposit of more than £30,000, which is enough to hit the 5–10% deposit target for many first-time buyer homes.
The key with a Lifetime ISA is to start as early as possible, even if you can only afford small monthly contributions to begin with. Opening an account now locks in the benefits for the future, and even modest amounts will grow over time – especially when you factor in the annual government bonus and any interest earned.
To get the most from your savings, it’s worth thinking strategically. Many buyers split their savings between a standard cash ISA and a Lifetime ISA, keeping emergency funds accessible while maximising the LISA bonus for their house deposit. Setting up a direct debit or standing order on payday can also help you save consistently without having to think about it. And don’t forget to check whether you qualify for schemes like the Mortgage Guarantee Scheme, which can allow you to buy with just a 5% deposit when combined with your Lifetime ISA savings.
Why does this matter so much right now? With mortgage rates still fluctuating, lenders are paying close attention to deposit size and affordability. The bigger your deposit, the better your options. It could mean lower monthly repayments, access to a wider range of deals, and even exclusive lower rates. At Quick Mortgages, we’ve seen first-hand how even a few extra thousand pounds can make the difference between a standard mortgage offer and a truly competitive one.
Setting up a Lifetime ISA is just one piece of the puzzle, though. Speaking to a mortgage broker early – even if you’re a year or two away from buying – can save you time and money. At Quick Mortgages, our advisors work with first-time buyers every day, including those in specialised roles like the police, NHS, and armed forces. We can guide you through every step, from choosing the right mortgage product to exploring schemes that stretch your affordability or help with probationary employment status.
With ISAs surging in popularity and Lifetime ISAs offering unmatched bonuses, there’s never been a better time to start saving for your first home. The sooner you begin, the faster you’ll reach your goal – and with the right advice along the way, you’ll be in the strongest possible position when it comes to securing your mortgage and getting the keys to your new home.
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Disclaimer:
This article is for general guidance purposes only and does not constitute legal, financial, or professional advice. Mortgage products and their terms can vary, and it is important to seek advice from a qualified, regulated professional who can assess your individual circumstances. Please ensure you consider your unique needs before making any financial decisions.
While every effort is made to ensure that the information provided on this blog is accurate and up-to-date, we do not guarantee its completeness or accuracy. The mortgage market can change rapidly, and the information on this blog may become outdated. We recommend verifying any information before acting on it and seeking tailored advice.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
