April marks five years since Help to Buy was launched. The Government-financed scheme has helped tens of thousands of first-time buyers get on the property ladder, either through assistance on deposits or through shared ownership schemes that make a first home more affordable.
With £10 billion funding for Help to Buy guaranteed until 2021, the scheme’s popularity is sure to continue.
For many first-time buyers, the Help to Buy scheme – from equity loan to ISA to shared ownership – has made the difference in them being able to afford to buy their own home. Government figures suggest around 300,000 people have been helped by the scheme so far.
The main benefit of the equity loan element of Help to Buy is that buyers need only a 5 percent deposit to buy a home with a 75 percent mortgage. Help to Buy makes up the difference with an interest-free (for the first five years) loan.
The London Help to Buy equity loan maximum is 40 percent of the property’s value, reflecting higher property prices in the capital.
April 2018 also marks the first time that those who were among the first tranche of buyers using the equity loan in April 2013 must start paying interest on the loan, assuming they are still in the same property. The rate is set at an initial 1.75 percent and will rise each year by 1 percent above the RPI rate of inflation.
The interest payment does not clear the loan, which has to be repaid in full when the mortgage period ends or when the property is sold, whichever comes first.