Mortgage bills could sky rocket for millions of Brits if plans to change cash ISA rules go ahead, the UK’s biggest lenders have warned. Yorkshire, Coventry and Skipton Building Society have all said costs could spiral if the cash ISA tax-free allowance is cut.
The Chancellor is reportedly plotting to cut the maximum amount savers can put into a cash ISA without being taxed from £20,000 to just £5,000. As it stands, you can put away £20,000 a year in ISA savings accounts without being hit by the tax man. However, all three major lenders have warned this could curb their ability to raise the funds used to offer customers loans, according to The Telegraph.
Chris Irwin, Yorkshire Building Society’s head of savings, said: “Reducing Isa deposits could make mortgages more expensive and less available. Cash Isas make up 39% of all building societies’ retail savings balances.”
Mr Irwin also claimed ISA cuts could get in the way of the Government’s plan to build 1.5million homes by 2029. Skipton Building Society, the fourth largest building society in the country, also said it had warned Rachel Reeves that her plans risk “directly undermining the Government’s own target of building 1.5m new homes”.
Chief executive Charlotte Harrison said: “If ISA inflows fall, the cost of funding is likely to rise, and that means mortgages could become both more expensive and harder to access.”
Jeremy Cox, head of strategy at Coventry Building Society, said changes to the cash ISA market could damage building societies’ “ability to support mortgage lending and potentially leading to higher cost of mortgages and a fall in housing market activity”.
The claims from the lenders comes as Ms Reeves reportedly prepares to unveil plans to slash the cash ISA limit at her Mansion House speech on July 15. Ms Reeves said in June she had no plans to reduce the total amount that can be saved into ISAs each year. However, City bosses have been urging her to reduce the cash ISA allowance to encourage savers to invest their money in stocks instead.