Location Location Location's Phil Spencer warns first-time buyers over common payment method

Location Location Location star Phil Spencer has issued a warning to UK households using a common payment method for their home purchases. The Channel 4 property expert has sounded the alarm over the Lifetime ISA, or Lisa, as it is known.

Speaking on YouTube series First Home Focus, Phil warned over Lifetime ISA penalties. He said: “This is something you really are going to need to save for and work hard to try and gather. If you have, for example, a 5% deposit, this would leave you needing to borrow 95% of the cost. That would be known as 95% Loan to Value (LTV).

“But be aware, the higher the LTV, the more costly the mortgage will be in the long-run. In an ideal world, the greater the deposit, the more favourable the rate and more cost-effective the mortgage.” He said: “So how can you save for a deposit? One option is to stash your cash into a lifetime ISA.”

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Mr Spencer continued: “So if you save the maximum allowance, which is currently £4,000 a year; with the Government top-up, you'll add £5,000 to the kitty every year.” And the star, who stars alongside Kirstie Allsopp, warned: “You can only use the money towards buying your first home and that has to be for £450,000 or less.

“Use it for any other purpose before you're 60 and you'll pay a hefty 25% government withdrawal charge, so you'd actually get back less than you paid in. The withdrawal charge also applies to any withdrawal in the first 12 months of your lifetime ISA, even if it's to buy your first home.”

He saud: “So, if you're planning on buying within the next year then this might not be the right account for you. But otherwise, it's really good news.” Dan Coatsworth, AJ Bell investment analyst, said: “Aspiring homeowners could be frozen out of using a Lifetime ISA unless this flaw in the system is fixed.

“While in many parts of the country a typical first home will cost far less than £450,000, large parts of London are already well over the threshold for a terraced house or a flat. Lifetime ISAs may not be designed to help people buy homes in Kensington or Fulham, but Watford and Welwyn surely shouldn’t be off limits.” He added: “The property valuation cap hasn’t changed since the Lifetime ISA launched seven years ago, even though property prices have subsequently moved higher across parts of the UK.

“Increasing the £450,000 limit and ending the unfair exit penalty levied on top of the government bonus would ensure Lifetime ISAs help as many aspiring homeowners as possible.”