Martin Lewis has discussed people saving to buy their first home in the coming years with Chancellor of the Exchequer Rachel Reeves. The financial expert recently aired a snippet of his interview on his Martin Lewis Money Show.

The discussion centred around the Lifetime ISA (LISA), a popular savings tool used by many aspiring homeowners. LISAs can be opened by anyone under 40 and allow annual contributions of up to £4,000 until the age of 50.

The Government boosts these savings by adding 25 per cent to the annual contribution, provided the funds are used to purchase a first home or are not withdrawn until the account holder is 60. This makes LISAs an effective strategy for both first-time buyers and those planning for retirement.

However, accessing the funds before turning 60, unless it’s for buying your first home or in exceptional circumstances such as terminal illness, incurs a 25 per cent withdrawal charge.

Additionally, the bonus will not be granted if you withdraw within 12 months of opening the LISA, or if the property costs more than £450,000. Mr Lewis has extensively discussed this latter point, given the high property prices in London and the south-east of England.

During the Budget, Ms Reeves revealed that the Government is examining a replacement for the LISA. Mr Lewis read out a viewer’s question to the Chancellor: “Could you ask the Chancellor why they can’t change the £450,000 cap on lifetime ISAs before the consultation? We’ve discussed this many times. So many are stuck and can’t wait for a consultation.

“Yeah, so the consultation is getting up and running. We want to get this right. We’re going to introduce a new product, a better product. This is the system we inherited. We are doing that consultation,” Ms Reeves said.

“People with LISAs now are very worried,” Mr Lewis replied. “Many people are saying, should I take my money out of a LISA right now because of this, Chancellor? I could do with your help so that they have some legitimate expectation of what’s going to happen.

“Well, we’ll crack on with this consultation and make sure that the new product works better than the one it’s going to be replacing,” Ms Reeves answered. “But I would encourage people, if you’ve got money in a LISA at the moment, nothing is changing.

“Of course, as part of that consultation, we will look at the price of the property you can buy, and we will look at that for people who have already got money in a LISA.

“And if you have a LISA, do you think you’ll be able to port the whole thing to the new product?” Mr Lewis asked. “That’s why we’re having a consultation, to answer these questions. And I really encourage you and Andy and all your viewers who’ve got views on this to feed into that consultation so we get it right,” Ms Reeves urged.

Mr Lewis then offered guidance to first-time homebuyers with a LISA, as well as those considering purchasing in London and the South East where property prices could easily exceed £450,000.

“Well, not much meat to go on on that, is there, to be absolutely honest? So let me give you my view. First of all, by the way, I’ll also be pushing for the help to buy ISA to be able to go into this new product as well, which it should be,” he stated.

“If you’re going to be buying a house under £450,000 in the next three or four years, I would absolutely certainly be opening and putting my money into a Lifetime ISA.

“If you think you might be buying a house in the south-east where the price is over £450,000, I would be very cautious about putting a substantial chunk of my money in the cash ISA because of the penalty and we don’t know what’s happening to it.

“As for putting pension money in, I would open an ISA, but I would be cautious about putting too much money in there at the moment because we simply don’t know what will happen, although I suspect it will be fine. I mean, you’ve got the same answer as I’ve got on it.”