Rachel Reeves’ cash ISA plans would ‘choke mortgages’
Rachel Reeves’ plans to slash the tax-free cash ISA allowance “would be effectively choking mortgage availability” for those who need them the most, a building society’s CEO has said.
Darlington Building Society was reacting to the news that the Chancellor is set to announce a lowering of the current £20,000 cap that savers are allowed to put in cash tax-free as part of the individual savings account wrapper.
Reeves is expected to confirm the move in her upcoming Mansion House speech in a bid to encourage British savers to invest in London-listed firms and breathe life into the UK’s ailing capital markets.
Darlington Building Society chief executive 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”.
Rachel Reeves could cause ‘reverberations across the housing market’
Craddock said: “Cash ISAs underpin the UK mortgage market, providing a vital source of funding for building societies, which is lent out as mortgages to support the UK’s housing market.
“By massively 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.
“This can include the self-employed, older borrowers or even those looking to build their own dream home.
“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.”
Darlington Building Society has nine branches across the North East and had assets of almost £1bn at the end of 2024.
As a mutual lender, the building society uses member deposits – including cash ISAs – to fund its mortgage lending.
It added that a fall in ISA deposits would “directly impact how much building societies are able to lend”.