Reeves warned ‘undermining cash ISAs a serious mistake’
Chancellor Rachel Reeves has been warned that “undermining” cash ISAs would be a “serious mistake” and could hike the cost of mortgages and make them harder to access.
Skipton Building Society has joined the chorus of institutions voicing their concerns ahead of the Chancellor’s Mansion House speech next week where she is expected to announce a lowering of the current £20,000 cap.
However, Skipton has warned that such a move “could have an impact on savers who are taking a responsible approach and affect the availability of and cost of mortgages”.
The building society has also revealed it has seen cash ISA applications surge by 45 per cent in just one week.
It has also suggested that instead of the cap being reduced, an industry-led education campaign, funded by investment managers, should be launched to help consumers understand when to save and when to invest.
The comments from Skipton Building Society come after the CEO of Darlington Building Society said Rachel Reeves’ plans to slash the tax-free cash ISA allowance “would be effectively choking mortgage availability” for those who need them the most.
Andrew Craddock said the policy would impact first-time buyers and “those who struggle to find a mortgage with mainstream high street lenders”.
He added that this could include the self-employed, older borrowers “or even those looking to build their own dream home”.
Earlier this week, Reeves’ plans to cut the cash ISA limit were blasted by the bosses of Britain’s top building societies over fears they will hike borrowing costs.
A draft letter being circulated by the Building Society Association (BSA) warned savers could be deterred by reforms and Labour’s housebuilding ambitions will be derailed.
Others in the City think reform to the cash limit would prove to be an effective way to encourage savers into listed equities.
Reeves’ cash ISA changes could make mortgages ‘more expensive and harder to access’
Charlotte Harrison, CEO of home financing at Skipton Building Society, said: “For over two decades, cash ISAs have helped millions of people build funds for a rainy day, save for home deposits, and protect their short- and medium-term financial goals without worrying about tax eating into their returns.
“Undermining that with a rushed cut to the annual allowance would be a serious mistake.
“Building societies, which account for over 35 per cent of all first-time buyer lending, rely on retail deposits, including cash ISAs, to fund mortgage lending.
“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.
“That risks directly undermining the government’s own target of building 1.5m new homes, a goal that depends on buyers being able to secure affordable mortgage finance.”
She added: “We fully support the ambition to get more people investing, but only when it’s right for them. Investing can be a powerful tool.
“But for many, especially first-time savers, lower earners, or those approaching or in retirement, cash savings remain the safer, more appropriate option.”