Moneybox is offering a rate of 1.4% on its cash LISA which is the highest rate currently on offer for these products, which come with the perk of a 25% Government bonus.
The new product, which has been launched in collaboration with OakNorth Bank, is only the fourth cash LISA to be released since the Government launched the savings plans to help people either buy their first home or save for retirement.
Since the launch three building societies – Newcastle, Skipton and Nottingham – have brought offerings to the market. Newcastle’s 1.1% LISA comes in 0.3% lower than Moneybox’s latest account.
Free money
Ben Stanway, co-founder of Moneybox, said it had been very surprised to see so few banks make the LISA available to their customers.
He said: “We hope that by offering a market-leading rate through our partnership with OakNorth Bank, we can encourage many more people to take advantage of the free money being offered by the Government.”
The new launch comes just five months before another first-time buyer depositing saving scheme, which also offers a 25% bonus, is due to be pulled. The Help to Buy ISA is closing to new investments on 30 November.
It has led to speculation more providers could start offering Lifetime ISAs to plug the gap in this savings market.
Increased competition
Rachel Springall, a finance expert at Moneyfacts.co.uk, said it would be interesting to see whether any other brands decided to enter the market off the back of this new deal.
She said while OakNorth Bank was a lesser-known brand than the building societies already operating in this space, it had been a ‘great contender’ in the savings market.
“There hasn’t been as many providers launching a cash LISA in this arena, so its great news to see a new account launched to give consumers more choice,” Springall said.
“1.4% is a market-leading rate in the cash LISA market, but some savers may prefer to go with a more recognised brand, even if it means a slightly lower interest rate.
“LISAs are a good alternative to a Help to Buy ISA, not just for a first home but also for retirement, however they do carry different rules for later life withdrawals, so savers best read up on the workings before they invest.”
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