Help to Buy Loan Interest Bomb Waiting to Go Off

Published / Last Updated on 29/05/2019

The Government’s Help to Buy Scheme has seen over 200,000 properties bought since it was introduced back on 1st April 2013.

The Help to Buy scheme means that first time borrowers would only need a 75% loan to value mortgage plus save a 5% deposit and borrow a 20% (initially interest free) loan from the scheme.  No loan interest fees would be payable for the first 5 years although a nominal £1.00 pm (£12.00 pa) admin fee is charged. 

If the Help to Buy 20% loan has not been repaid in the first 5 years then interest starts to be charged.  Many of the first people to use the Help to Buy scheme in 2013 are already facing additional interest rate charges and when the scheme really started to take off 2014 now face their 5 year interest free loan period ending in 2019 and pay interest fees for the first time. 

The Government loan is interest free in the first 5 years, then at year start of year 6 interest at 1.75%pa and then goes up yearly by the increase in the retail price index plus 1% pa.

The Government has estimated that a borrower that has a £40,000 loan and estimating the retail price index being 5% their yearly costs could go from £12.00 pa in the first 5 years to £712.00 and still goes up year after year.


The worry now is if borrows have not had correct advice when signing up to the Help to Buy scheme and not had the scheme explained properly.  Are you prepared for more interest payments on your mortgage.  What if inflation creeps up even higher?  The Help to Buy scheme is due to end 2023.

From us:  New Help To Buy Interest and Repayment Calculators coming soon.

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