Story for The Sunday Times: Struggling to remortgage Help to Buy loans

As a professional landlord, I come across a lot of people stuck in the Help To Buy quagmire. Often times these are people who bought houses at high leverage, with little equity and a degree of government-induced borrowing. The house prices they paid were higher than average market values at the time, for the simple reason that they were paying for the privilege of putting their names on the Land Registry with very little "hurt money" involved (5% equity, government-backed borrowing and all that).

Now that the storm has blown past, a lot of these folks find themselves swimming naked. We are being presented with several opportunities to buy people out of the holes that they dug themselves into.

We previously worked with a number of builders and have 100s clients with HTB. The majority of customers that have got to the 5 year point who were considering buying it back have left it for 2 years as better to have the loan on a 1.75% interest rate than buy it back at 4.5%+. They are aware of the fact that the equity will go up or down, but given the talks of the housing market dropping in price over the next 12 months. It financially doesn't make sense it buying back the HTB anyway. We have had 1 person buy back HTB loan in the last 6 months.

I think this will be more common these next couple of years due to the interest payable eating into the cost of living. A lot of people are still in the nice, 0% interest period!

It's important for clients to understand that paying off their Help to Buy loan at the end of the interest-free period may not always be the best decision. For those approaching the end of the interest-free period, where interest rates are relatively higher now, it may be cheaper to keep the Help to Buy loan, as the interest payable starts at 1.75%.

That said, nobody knows exactly what's in store for house prices, whether that's a crash, correction or an increase. If prices drop or increase, so will the amount owed to pay off the Help to Buy loan. If prices do drop, I understand why clients might still want to pay off their Help to Buy loan, even if the rates are relatively high, although predicting the point that the property reaches its lowest value is almost impossible in itself.

This is a common problem. We are facing. Many people went took out the help to buy loans didn’t have a clear understanding and weren’t aware that you repay 20% of the property is value. Not what are you originally borrowed which makes it much more difficult with higher interest rates and tighter affordability when coming to remortgage to repay existing loan.

We arranged several hundred Help To Buy loans and several clients have asked about buying out the share, arranging a mortgage to rent the property, and remortgaging to another lender. The surprise to them is always they need to contribute cash savings to cover shortfalls and costs they were not expecting - and as a result looking to sell at the point the HTB interest becomes payable.

There’s no denying that Help to Buy was a huge success, helping thousands get on the ladder that otherwise could not have. Its legacy is still a developing one, the first HTB equity loans started in 2013 with terms of 25 years, and the last loans are only now starting. If you ever want to give a HTB loan holder the shivers, whisper ‘Target’ in their ear. This is perhaps the single most referenced reason people might be hesitant to remortgage to another lender if they have a HTB loan, they need permission from the appointed HTB administrator ‘Target HCA’. Target’s reputation for service is poor (putting it nicely) and their quoted timescales ordinarily lead to people simply selecting a ‘Rate Switch’ product with their existing lender as this requires no permission from Target HCA. Mercifully, Rate Switch products aren't too bad!