Darlington Building Society has warned that the Government’s anticipated cut to the cash ISA allowance could have "wide-reaching consequences" for mortgage funding, savers, the housing market and the UK economy.

The Chancellor is expected to announce a reduction in the cash ISA allowance during her Mansion House speech later this month.

However, chief executive at The Darlington, Andrew Craddock, has called on the Government to reconsider the move.

He stated that cash ISAs "underpin the UK mortgage market", providing a source of funding for building societies, which is lent out as mortgages to support the housing market.

Building societies and mutual-owned were responsible for 52% of total mortgage market growth in the six moths to March 2025.

Craddock added that by reducing this key source of funding, the Government would be "effectively choking mortgage availability for many first-time buyers and those who struggle to find a mortgage with mainstream high street lenders".

It comes as almost half (47%) of cash ISAs are held by individuals earning less than £20,000 per year. The Darlington said that any reduction in the allowance would disproportionately affect lower income savers.

Craddock concluded: "It is disappointing that the government looks set to reduce the tax-free cash ISA allowance, at a time when we are all working hard to encourage people to build up their financial resilience.

"Cash ISAs are used by those who want to earn interest on their funds without taking the risk of investing and enjoy the benefits of tax-free saving whilst knowing exactly where their money is. Most typically, this is older savers and those on lower incomes.

"By making cash ISAs less attractive, savers will likely explore other options, and it is difficult to see how building societies could sustain current lending levels if cash ISA deposits were significantly reduced. This would directly impact the mortgage market, with reverberations across the housing market."

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