Darlington Building Society chief urges government to rethink plans amid concerns over funding pressures
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 (pictured) 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.
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