Help to Buy customers struggling

Many first-time buyers who purchased their home through Help to Buy are now facing mortgage arrears, as the previous housing minister poured some cold water on a revival of the scheme only a month ago before being ousted by Sunak. Constant uncertainty in the market and lack of confidence in buyers is still taking full effect, as transaction volumes are at their lowest in five years (excluding the unnatural activity in 2020 during the pandemic), so clearly, these homeowners can't sell and move on either. The number of FTBs who used the Government’s Help to Buy programme but are now behind with their home loan payments runs into the thousands. Many economists are now predicting that the Base Rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2% target. These factors will pile more pressure on these FTBs who would have wanted to refinance their government-backed equity to a regular mortgage.

There has no doubt been a rise in homeowners struggling to repay their help-to-buy scheme with considerably higher interest rates, and rising property values it means most can't afford to repay their new mortgage payments let alone raise an additional 20% or 40% of their property value back. This has led to many difficult conversations and a big concern for many whose mortgage is due to expire and interest-free period ending with their help to buy a loan.

Speaking with an independent mortgage broker is a must before considering repayment of the loan the wrong decision can be very costly.

Help to buy has been a fantastic sheme over the year allowing so many to get on to the property ladder I have used it myself however I think the government needs to be more innovative with their next scheme we really want to avoid further property price increases I feel bringing this back would only put property values further out of reach for first time buyers.

Help to Buy in our opinion did nothing but damage the UK property market with well overpriced new homes that are now not worth what has been paid for them. The borrowers, who are now struggling to repay inflated mortgage payments, due to the base rate rises, are looking down the barrel of a gun that has mortgage rates up to 3 times higher than they originally were, property valuations much lower than they were, and an interest-free period that's ending that lenders current affordability rules don't allow them to get close to being able to repay the debt. No, we don't want to see Help to Buy brought back - the government needs to focus on overhauling the Shared Ownership scheme that has some very Draconian clauses in some leases.

Help to buy was the ultimate buy now pay later scheme. Buy now pay later might be alright for a fridge, but your home? It should have only been used if people were not able to buy a suitable property without the schemes help, in my opinion.
A family of 4 living in a two bedroom home who could only buy another 2 bed without the scheme would be prime candidates. But young couples and singletons buying 4 bed detached homes that were beyond their needs and means without the use of the scheme, but just did it because they could, I think will live to regret it. When I explained the long term implications of the scheme to first time buyers most then realised that it was to be used if you needed it, not just if you wanted it.
The stakeholder that got the biggest benefits were the house builders, I don’t think there’s any argument about that.

More now than ever, Help to Buy (HtB) borrowers find themselves trapped in a perfect storm created by ever-increasing house prices and rising interest rates.

For a variety of reasons, most want to repay the HtB loan as soon as they can. Some can pay cash, others can downsize, but for most of us, this means replacing the HtB loan with a mortgage.

There's a sting in the tail. House prices have risen around 30% in the last 5 years - that means the amount owed to HtB increases by 30% also.

The result - a £50k interest-only equity loan at 0% interest is now a £65k interest and repayment mortgage at 5% interest - monthly payments go from nothing to £300 minimum.

For many, repaying HtB is a non-starter. The remaining options are to sell up or leave it in place. The latter restricts remortgage opportunities, but retains an affordable 'holding pattern'. The hope then is that a fall in house prices, and a settling of interest rates next year would make full repayment viable.

The Help to Buy scheme should have been renamed to Help to Sell. It massively benefitted developers more so than clients, certainly before it was restricted to FTB only.
It saw people buying at over-inflated prices, with money that wasn't theirs, and many bought a home that, in normal circumstances, they couldn't afford. Once you couple that with the recent interest rate rises, it means that so many are trapped paying significantly more than they'd bargained for, in a house that might struggle to fetch what they paid for it. Even if the house has increased in value, so has their equity loan, along with the cost of servicing the interest. It's a perfect storm!

Personally, I've never been a fan of the Help to Buy Scheme. The interest-free period can make it feel like 'Monopoly' money, because you don't have to pay for it right away.

We'd always discuss the future implications with clients, such as rising interest rates and that the amount you repay will be based on the future value of the property (something that we often find comes at a surprise).

More recently, where mortgage rates have risen, the starting Help to Buy interest chargeable may actually be cheaper than raising funds to pay off the loan, but the issue is that some lenders may not take on a remortgage where a Help to Buy loan remains. For those that do, we've found that the legal side of the process takes forever and a day.

We've definitely seen an increase in customers feeling the pinch now their equity loan repayments have kicked in. That unexpected extra few hundred pounds a month has been the straw to break the camels backs for many of them leaving little option but to consolidate their other debts to make ends meet and reduce their overall outgoings. Unfortunately it's just a perfect storm that those payments are hitting just as they may be having to remortgage onto the new higher rates on offer now.