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Telegraph request: Help to buy equity loans

Journalist: Alexa Phillips, The Daily Telegraph

ended 29. September 2023

Hello, I'm a reporter at The Telegraph. I'm looking to speak to brokers about people who bought with Help to Buy and are now struggling - a lot of people got cheap mortgages and their interest is now becoming due on their loans - good to chat about what people are hearing from clients. Please email alexa.phillips@telegraph.co.uk with your contact info or comment here if you can help . Many thanks! - Alexa

8 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
The Buy to Buy loan is probably the cheapest borrowing on property, with their rates typically nearer 1% and with annual inflationary increases not making any significant impact in the near future. So whilst the interest cost may be a new commitment to those after 5 yrs of Help to Buy, the comparison to a higher mortgage without that support would have meant a significantly more expensive mortgage payment. Also, the Help to Buy loan value is reducing in line with property values, so the opportunity to repay them may be best for the future, and not now.
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Darryl Dhoffer
Founder at The Mortgage Geezer
Let's look at this in more detail and what the best route would be in today's interest market
Help to Buy Equity Loan interest: Starts in year 6 at 1.75% of the loan amount
Increases each year by 1.75% + CPI + 2%
Example: On a £200,000 home with a 20% Help to Buy Equity Loan, monthly interest in year 6 would be £58.33/m
Remortgage to clear Help to Buy: Typical interest rates are 5.0%, with monthly repayments of £233/m, of which £166/m is interest (Based on 25yr term for calculation)
Conclusion: It is generally better to keep the Help to Buy Equity Loan and make overpayments. If you can afford to repay £233/m(which includes £174 overpayment and Help To Buy Interest Payment of £53/m), the loan will be paid off quicker even when factoring in additional CPI rate + 2% from Year 7 onwards. Also, any reductions in house value from purchase price, means the Help To Buy Loan also decreases, meaning loan can be paid off quicker.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Count me in. Got strong views on this.
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Mike Staton
Director at Staton Mortgages
The beauty of the Help to Buy loan is the ability to keep it on an interest-only basis, keeping a portion of your mortgage repayment relatively lower. For instance, I still have help to buy on my property, my remortgage is due in February and the payments increase from £678 to £1137 per month, if I decided to consolidate my Help to buy loan into this then it will increase further to £1407, whilst keeping it on an interest only basis will only add a further £87 per month to may payment, in these times of rising costs, it suits me to keep it as interest only. However, it is important to remember that these types of loans are not one size fits all and that just because this fits my needs, it doesn't mean it will suit the next person.
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Adam Smith
Founder at Alfa Mortgages
Getting quite a few of these come through now. Happy to have a chat. Drop me an email.
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James Bull
Mortgage Broker at JB Mortgages
In England, the equity loan element of the help to buy was interest-free for the first 5 years. The interest payments have been factored into affordability by lenders so i have rarely heard from any clients having difficulty with the payments. For those lucky enough to have used the scheme in Scotland the equity loan was interest free for life so this will not be a problem they will ever be having !
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Charles Breen
Founder at C B
Help To Sell is a more accurate name as all it ever did was help house builders profit, which is the current crisis for homeowners caused by help to buy is perfectly illustrating. My clients with help to buy now feel mugged off by the scheme if I am honest, they all knew they were overpaying for the houses when they bought them, but they saw as being similar to buying a new car, you pay a little more as its new, but now everyone has seen it just went to inflate the profits of house builders to eye watering amounts.
Now that they are having to remortgage, some coming off some incredibly attractive rates, seeing payments doubling, to add insult to injury they are facing paying hundreds a month extra just on interest on HTB. We are getting a lot of enquires about what they can do, by the end of some phone calls when we lay out the likely monthly payments they are asking if we know any estate agents to recommend. It’s a total car crash and was totally avoidable.
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Gary Boakes
Director at Verve Financial
Probably around 80% of our remortgages at the moment are people with HTB loans and all coming up to the 5th year. All of them bar 1-2 are keeping the HTB in place as the interest rate on the HTB is a low 1.75% and lot cheaper than there original plans which was to absorb it into the mortgage. It is an extra payment shock wth the extra mortgage payments, but still works out cheaper to keep the mortgage and HTB separate at the moment.