Help-to-buy gave interest-free loans of 20% of new house value (40% in London) for 5 years. After that, loan repayment (currently 1.75%) kicks in. That 20% or 40% of home value is still owned by the government and any increase in the home’s value results in increased charges at the year 5 point. Early adopters of this scheme are now reaching this 5 year point. The government’s loan repayments will be in addition to mortgage payments and will rise with the cost of living (and at the same time many mortgage rates may rise if or when the bank rate increases).
Some buyers who have seen big gains in property value may be able to trade up and pay off the loan, but anyone who has seen static value or even a fall (many new houses were over-priced) will be in trouble.
Those whose homes have not increased in value face “a ticking time bomb” according to the think-tank Resolution Foundation.
Wonder how Cranbrook residents who took advantage of the scheme feel now?
And was this consequence foreseen by government or borrowers?