The CEO of a building society has warned that Rachel Reeves' plans to cut the tax-free cash ISA allowance could significantly limit mortgage availability for those who need it most.
Darlington Building Society responded to news that the Chancellor is set to announce a reduction in the current £20,000 cap on tax-free savings as part of the individual savings account wrapper, as reported by .
The move is expected to be confirmed by Reeves in her forthcoming Mansion House speech, as part of an effort to encourage British savers to invest in London-listed companies and revitalise the º£½ÇÊÓƵ's struggling capital markets.
Andrew Craddock, chief executive of Darlington Building Society, said the policy would affect first-time buyers and "those who struggle to find a mortgage with mainstream high street lenders."
He added that this could include self-employed individuals, older borrowers "or even those looking to build their own dream home."
Craddock stated: "Cash ISAs underpin the º£½ÇÊÓƵ mortgage market, providing a vital source of funding for building societies, which is lent out as mortgages to support the º£½ÇÊÓƵ'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."
Rachel Reeves could cause ‘reverberations across the housing market’
"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, which boasts nine branches across the North East and had assets nearing £1bn at the close of 2024, functions as a mutual lender using member deposits – such as those from cash ISAs – to fuel its mortgage lending.
The society noted that any decrease in ISA deposits would "directly impact how much building societies are able to lend."
