A tax raid on cash Isas will make mortgages more expensive, the boss of one of Britain’s biggest building societies has warned.
Richard Fearon, chief executive of Leeds Building Society, also said hundreds of customers had raised concerns that the tax-free savings limit will be slashed.
Fearon, who has written to Rachel Reeves to express his concerns, is the latest building society boss to back the Mail’s Hands Off Our Cash Isas campaign, standing up for the millions of savers who have nearly £300billion in the accounts.
The Chancellor is thought to be considering a shake-up in this month’s mini-Budget – which could include reducing the £20,000 tax-free allowance. City fund managers have argued that the savings would generate better returns if they were invested in the stock market.
But such a move would be ‘unlikely to achieve’ their objectives, said Fearon, who has been in post since 2019. Trade body the Building Societies Association has warned Reeves scaling back the tax break would cause mortgage rates to rise and could lead to a housing market downturn.
Directors at Skipton Building Society and Nationwide have also urged the Chancellor to protect the savings initiative.
Warning: Leeds Building Society boss Richard Fearon has written to Rachel Reeves to express his concerns
Reducing the tax-free allowance ‘would result in bigger tax bills for savers and higher repayments for mortgages’, Fearon told the Mail.
Building societies use the money saved in cash Isas to fund mortgages and other loans. If less money is kept in the accounts, there will be a smaller pot to help potential buyers get on the housing ladder.
‘If cash Isa funding was removed, mortgage rates would become more expensive for borrowers,’ Fearon said in his letter to Reeves, seen by the Mail.
‘The last thing that families and aspiring homeowners need is to have greater pressure on their mortgage bills.’
He said concerned customers had contacted all of the building society’s 51 branches in recent weeks. Fearon, who thanked the Mail for its campaign, said: ‘[Customers] think it is unfair. They like that their money goes towards helping others buy a home. They don’t want to invest in stocks and shares and they feel they will be penalised for saving.’
Responding to the comments, Reeves reiterated that she ‘wants to get the balance right’ between cash savings and investment in stocks and shares.
‘I do want to create more of a culture in the UK of retail investing, like what you have in the United States, to earn better returns to savers and to support the ambition to grow the economy, creating good jobs right across the UK,’ she said.
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