. Based on the current RPI of 12.6pc, this means the rate will increase to 1.99pc this year. The rate on the equity loan is therefore much lower than on a mortgage – but the jumps in monthly bills will come all at once. Hamptons' calculations incorporate 11pc house price growth over the past five years, which means that the homeowner will be able to reduce their mortgage size from 55pc to 42pc. But here Help to Buy owners are likely to get caught out by the falling housing market. There are widespread expectations for house price falls, with a range of analysts forecasting drops of 10pc to 15pc. Homes on the first-time rung of the ladder, particularly in London, are expected to be worst hit. Andrew Wishart of Capital Economics, a research consultancy, warned that homeowners who purchased using Help to Buy could be forced to take big price cuts if they wanted to sell up. A wave of Help to Buy owners could become trapped by the market. The properties that they live in are primarily entry level flats – homes that are typically bought by other first-time buyers or buy-to-let investors. These are the two groups of buyers that are worst hit by the cost of living crisis and soaring mortgage rates. In the past two weeks, first-time buyer demand was down by 30pc compared with the first two weeks in 2021, according to property website Rightmove. Landlords are unlikely to step in to fill the gap. Lenders calculate affordability for buy-to-let loans by measuring rental income as a ratio of mortgage interest payments – as rates rise, many buy-to-let properties are becoming unmortgageable. Help to Buy homeowners will also have lost their new-build premium. Mr Wishart said: 'Combined with the possibility that the Help to Buy scheme inflated the value of the prop){kind=link}
Help to Buy was meant to help a generation onto the ladder – but now its beneficiaries are being hit from all sides
First-time homeowners who purchased using Help to Buy now must choose between taking big price reductions on their homes or accepting a huge remortgage crunch, experts have warned.
The Help to Buy “equity loan” scheme closes to new applicants on Monday – just as the previous Help to Buy generation has to grapple with 55pc jumps in their monthly payments or sell up.
The government scheme has allowed buyers to purchase new homes with a 5pc deposit and a 20pc loan (40pc in London). This loan was interest-free for the first five years.
Now, Help to Buyers coming to the end of this five-year period have to start paying interest, just as their remortgage bills are soaring.