UK mortgage sector faces risk of contraction as planned Cash ISA limit cut prompts industry warning

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1. https://meyka.com/blog/mortgage-uk-impact-reduced-cash-isa-limit-could-shrink-lending-by-60000-mortgages/ - Please view link - unable to able to access data
2. https://www.reuters.com/business/finance/uk-cut-tax-free-cash-savings-allowance-november-budget-telegraph-says-2025-10-25/ - The UK government is expected to reduce the annual tax-free cash savings limit in Individual Savings Accounts (ISAs) from £20,000 to around £10,000, as reported by the Telegraph. This change, anticipated in the upcoming November budget, aims to shift tax incentives to encourage investment in shares rather than cash savings. Currently, one-third of Britons hold ISAs, totaling approximately £726 billion, with most utilizing only the cash component and rarely reaching the annual allowance. The Labour government argues that promoting share ownership and supporting London-listed companies necessitates this rebalancing of tax benefits. However, the UK Parliament's Treasury Committee opposes the move, warning it could reduce mortgage availability since building societies use cash ISAs to fund home loans. The committee emphasized that low share investment is more due to a lack of financial education than to current tax structures. Financial Services Minister Lucy Rigby stated the government seeks to foster a 'shareholding democracy,' though the exact new limit has yet to be finalized.
3. https://moneyweek.com/personal-finance/cash-isas/cash-isa-limit-allowance-budget-reform - Chancellor Rachel Reeves is reportedly considering reforms to Individual Savings Accounts (ISAs) as part of the upcoming Autumn Budget, including a possible reduction of the annual cash ISA allowance from £20,000 to £10,000. The goal is to incentivize savers to invest more in the stock market, thereby stimulating economic growth and potentially offering better long-term returns. The government believes that encouraging retail investment could help revitalize the UK economy. While Reeves has previously stated she wouldn't reduce the overall ISA limit, the proposal to adjust the cash ISA component has stirred significant debate. Critics, including the Building Societies Association and savings platform Raisin UK, argue that such a move risks undermining public confidence in ISAs and could make lending more expensive, as cash ISA deposits fund many mortgages. Investment platforms like AJ Bell and IG support reform but call for simplification of the ISA system, such as merging cash and stocks & shares ISAs. Another potential reform includes mandating a minimum UK shareholding within stocks and shares ISAs or eliminating stamp duty on UK equities held within ISAs. If implemented, changes would likely take effect in April 2026.
4. https://www.itv.com/news/2025-10-24/government-should-not-cut-cash-isa-allowance-says-treasury-committee - A powerful committee of MPs has urged the Government not to cut the cash ISA limit in the hope of persuading more people to invest in stocks and shares, saying such a move would be unlikely to incentivise savers. The Treasury Committee said the focus instead should be on improving financial literacy and enhancing access to good advice and guidance, so people can make informed decisions with their savings. The committee warned that, as well as the direct impact for cash ISA savers, a potential reduction in the allowance could also backfire in other ways. The Treasury should focus on ensuring that people are equipped with the necessary information and confidence to make informed investment decisions. Building societies depend on cash ISA savings as a critical funding source for their mortgage lending, and the committee said if this was reduced, it could mean a less competitive market for financial products and higher prices for consumers. Rumours that the cash ISA limit could be reduced have been circulating for months, with recent speculation suggesting a £10,000 annual limit was under consideration.
5. https://moneyweek.com/personal-finance/reducing-cash-isa-limit-lending-difficult - Mortgage and loan providers, represented by the Building Societies Association (BSA), have voiced strong opposition to potential government plans to reduce the cash ISA limit from its current £20,000. In an open letter to Chancellor Rachel Reeves, the BSA emphasized that cash ISAs are not only crucial for individual tax-free saving but also serve as a major funding source for financial institutions, enabling affordable lending for mortgages and business loans. A proposed reduction to as low as £4,000 is seen as a threat to credit availability, housing growth, and broader economic stability. Financial leaders, including Chris Irwin of Yorkshire Building Society and Cecilia Mourain of Moneybox, argue that cutting the limit would discourage saving, disrupt capital supply, and increase borrowing costs. With over £300 billion held in cash ISAs—comprising 39% of all building societies’ savings balances—a limit cut could hinder the government’s goal of building 1.5 million new homes. While the Treasury has not confirmed any changes, Reeves has expressed interest in promoting a stronger culture of investing, potentially encouraging equity-based ISAs over cash savings. The final decision may be revealed in Reeves' Mansion House speech on July 15.
6. https://www.mpamag.com/uk/news/general/cash-isa-allowance-cut-could-hit-mortgage-lending/541529 - A potential cut to the tax-free cash ISA allowance could reduce funding available for mortgage lending, putting pressure on borrowers and the wider housing market, an executive of a mutual lender has warned. Chancellor Rachel Reeves is expected to announce a reduction in the cash ISA allowance during her upcoming Mansion House speech. In response, Darlington Building Society chief executive Andrew Craddock has urged the government to rethink the move, citing its direct link to mortgage funding. As a mutual lender, Darlington uses customer deposits — many held in cash ISAs — to support its mortgage lending activity. A drop in these deposits would restrict the society’s ability to lend, particularly to borrowers not well served by mainstream lenders. '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,' Craddock said. Building societies and mutual lenders contributed 52% of mortgage market growth in the six months to March 2025, highlighting their growing role in helping buyers access finance. Craddock warned that cutting ISA allowances could limit mortgage availability for first-time buyers, self-employed applicants, older borrowers and those pursuing custom or self-build homes. '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,' he said. Darlington also pointed out that lower ISA savings would be a long-term threat to lending capacity across the sector. With fewer deposits coming in, mutuals could face growing constraints on issuing loans — at a time when many borrowers already face affordability challenges. '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,' Craddock added. He pointed out that this could trigger a chain reaction through the housing market, impacting property transactions and broader economic stability.
7. https://www.cambridgeindependent.co.uk/news/scrapping-cash-isa-limit-would-be-damaging-the-cambridge-ch-9425034/ - The Cambridge Building Society’s chief executive is among those who have urged the Chancellor to save the cash ISA limit amid widespread speculation that it could be cut. Peter Burrows has added his name to an open letter to Rachel Reeves - reproduced in full below - that warns about the damaging impact the heavily-criticised idea would have on households and the wider economy. Chancellor Rachel Reeves on a recent visit to Cambridge Vacuum Engineering in Waterbeach, Picture: Kirsty O'Connor / HM Treasury Reports have suggested Ms Reeves could slash the annual tax-free cash ISA allowance from its current £20,000 limit in her Mansion House speech on 15 July. Such a move would be designed to encourage savers to put more of their money into riskier stocks and shares ISAs instead, in an effort to boost UK business, economic growth and under-pressure stock markets. But the Building Societies Association (BSA), which represents all 42 UK building societies, two mutual-owned banks and seven credit unions, warns this could lead to higher borrowing costs, reduce access to credit across the economy and discourage savers who, they point out, are unlikely to develop a greater appetite for riskier investments simply because of a change to the limit. More than 18 million people have a cash ISA, according to figures from HMRC and 47 per cent of those are held by people with incomes of less than £20,000 a year. The average savings balance is just under £13,400. In the letter signed by Mr Burrows, he and fellow members of the BSA warn the Chancellor: “Cash ISAs are a cornerstone of personal savings for millions across the UK, helping people from all walks of life to build financial resilience and achieve their savings goals. Beyond their personal benefits, cash ISAs play a vital role in the broader economy. The funds deposited in these accounts support lending, helping to keep mortgages and loans affordable and accessible. Any significant reductions to the cash ISA limits would make this funding more scarce which could have the knock-on effect of making loans to households and businesses more expensive and harder to come by.