Chancellor John Healey has announced a new first-time buyer ISA to replace the Lifetime ISA, alongside £4.7bn in government-backed lending for the Your First Home equity loan scheme, part of a package of measures to help more people onto the property ladder.

The first-time buyer ISA will replace the Lifetime ISA from April 2029, with changes to withdrawal penalties meaning savers will be able to recover at least the amount they have paid in if the home they want to buy exceeds the scheme’s property price limit.

From next spring, the Your First Home scheme will provide an equity loan option for FTBs who lack financial support from family to help them purchase a property. The government has committed £4.7bn in lending to support the scheme via a new equity loan scheme, supporting 70,000 first-time buyers with up to 20% government equity loans.

According to the Budget document, participants will benefit from a reduced deposit requirement and a five year interest free period, which will save the typical buyer hundreds of pounds a month.

Healey said the measures were intended to help young people who were working hard to save for a home but were struggling to achieve homeownership.

"For every young person who's working hard saving what they can, and dreaming of their first home, I'm taking action,” Healey said in his first Budget address.

The product will "retain the generosity of the Lifetime ISA", according to the Government, allowing savers to contribute up to £4,000 a year and receive a 25% government bonus. The bonus will be paid when funds are withdrawn for the purchase of a qualifying first home worth up to £450,000, removing the need for a withdrawal charge. Unlike the LISA, the new product will not have an upper age limit.

Recognising that some LISA holders may wish to buy a property above the £450,000 price cap, the Government will, from 29 October 2026, allow LISA funds to be withdrawn for such purchases if they otherwise meet the qualifying criteria. These withdrawals will be subject to a reduced 20% charge, ensuring savers do not lose any of their original contributions when purchasing a property above the cap.

“Home is the heart of all our lives. It’s the foundation on which we raise our families and build our hopes,” Healey said.

The announcements form part of a wider housing package aimed at increasing supply and improving affordability. The Chancellor pledged an additional £1.5bn for social and affordable housing, taking the government’s total commitment to £40bn, alongside measures to make it easier for councils to borrow to build homes.

The government will also seek to provide greater certainty for housebuilders by avoiding major changes to building regulations during the Parliament, except where required for safety, and removing biodiversity requirements for more brownfield sites.

Healey said the measures were designed to address immediate housing pressures while tackling the longer-term challenges facing the market, including the shortage of affordable homes and the difficulties young people face in saving for a deposit.

Paula Higgins, CEO of HomeOwners Alliance, commented: "Our worry here at HomeOwners Alliance is that a 20% interest-free loan restricted to new-build homes will steer buyers towards those properties, increasing demand and potentially prices. That risks creating a two-tier market, particularly in London, where many flat owners are already facing falling values and struggling to sell. The scheme must not help one group of buyers at the expense of people who already own a home."

Higgins added: “We welcome the removal of the additional penalty for Lifetime ISA savers buying a home above the £450,000 limit. People saving responsibly for their first home should not lose part of their own savings simply because local property prices exceed the cap.

“However, it is disappointing that the £450,000 property price cap will remain unchanged for both existing Lifetime ISAs and the new First Time Buyer ISA, which will replace the LISA for new accounts from April 2029. Londoners buying above that threshold will continue to miss out on the government purchase bonus."

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