Help to Buy 

Guide to Help to Buy

  • Learn what the Help to Buy equity loan scheme is and how it compares to the Help to Buy Isa.
  • Understand what the repayment options are and how mortgage advisers can help clients.
  • Consider whether the equity loan is a helpful way onto the property ladder or a ticking timebomb.
CPD
Approx.60min
Guide to Help to Buy

Introduction

Back in April 2013, the government launched its Help to Buy equity loan scheme, which means borrowers only had to pull together a 5 per cent deposit to buy a new build home.

The equity loan scheme, open to both first-timer buyers and homemovers but restricted to new-build homes, saw the government stump up a further loan of up to 20 per cent creating a combined deposit of up to 25 per cent.

This enabled people wanting to buy their abode access to mortgage rates from lenders participating in the scheme.

The government's 20 per cent slice of the loan was interest-free for the first five years.

But now the fifth anniversary of the first Help to Buy equity loans looms, which means those who borrowed using this scheme to buy a property will have to start repaying it with interest.

It will be something of a test for the equity loan scheme itself, which has been called a “ticking timebomb” by think tank The Resolution Foundation.

This guide seeks to establish what borrowers need to know about repaying the loan and how it dovetails with the Help to Buy Isa.

It will also look at how mortgage advisers and brokers can help any clients who face a decision about their equity loan.

Finally, the guide asks how helpful the Help to Buy equity loan really is.

This guide is worth an indicative 60 minutes of CPD.

Contributors include: Richard Bradley, head of data at Boring Money; Rob McCoy, senior product and business manager at TMA Mortgage Club; Lindsay Judge, housing expert at The Resolution Foundation; a spokesperson at the Ministry of Housing, Communities and Local Government; Michael Taylor, group marketing manager for proposition development at Santander; David Blake, principal mortgage adviser at Which? Mortgage Advisers; David Hearne, chartered financial planner at Satis Asset Management; Ray Boulger, senior mortgage technical manager at John Charcol; Craig Hall, new build manager at Legal & General Mortgage Club; Richard Norrington, chief executive at Ipswich Building Society; Helptobuy.gov.uk; Ipswich Building Society; and myfirsthome.org.uk.

Ellie Duncan is deputy content plus editor at FTAdviser

In this guide

CPD
Approx.60min
  1. How does Mr McCoy describe the HTB equity loan for those borrowers who cannot start to repay within the first five years?

  2. "You can never be in negative equity with an equity loan," according to Ms Judge. True or false?

  3. Mr Blake says a borrower's ability to remortgage will depend on four possible individual circumstances. Which one of these is incorrect?

  4. According to Mr Taylor, borrowers should also remember to discuss what with their post-sales Help to Buy agent?

  5. Mr Hearne voices "grave concerns" about the ability of borrowers to repay the equity loan, listing three things in particular that may make it more difficult. Which one of the below is not what he lists?

  6. Mr Taylor says Help to Buy has prompted a change in housebuilding behaviour, with more of what type of homes being built?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Learn what the Help to Buy equity loan scheme is and how it compares to the Help to Buy Isa.
  • Understand what the repayment options are and how mortgage advisers can help clients.
  • Consider whether the equity loan is a helpful way onto the property ladder or a ticking timebomb.

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