Help to Buy  

Is Help to Buy a ticking timebomb?

This article is part of
Guide to Help to Buy

However, she notes: "I think anybody who has probably taken one out is probably quite happy to have done it. At least for the first five years it is, in effect, free money. 

"I suppose the question is whether people make good plans ahead of time before the fees come in?

"It is one of those things where you potentially are achieving something you want to achieve in the short term, but perhaps constraining your choices in the longer term and that is really problematic."

Someone else who also has concerns about the Help to Buy equity loan is David Hearne, chartered financial planner at Satis Asset Management.

He does not have any clients with Help to Buy loans as the firm he works at is not a mortgage broker, but he has similar worries about borrowers who now face repayments.

He says: "I just have grave concerns about the ability for people to repay or re-finance their Help to Buy loan, particularly if their income has gone down, perhaps to start a family, if interest rates have gone up, or if their property value has gone down."

He asserts it is "undoubtedly a helpful way onto the property ladder, but at what potential future cost?"

Mr Hearne goes on: "For many, the Help to Buy equity loan is the only way they have been able to buy, and therefore they had to buy a newly built home.

"Five years later, their home is no longer new, and its value competes in the market with every other property.

"However, if the Help to Buy equity loan continues, future first-time buyers will continue to be directed to newly built properties, and not towards the existing market where previous first-time buyers may be wanting to sell in order to move to a larger home if they now have a family."

While he notes the Help to Buy Isa or Lifetime Isa will give a first-time buyer a greater choice of properties to buy, it "is likely to take longer to save and therefore longer to purchase" via this route. 

"That may have been a concern when house prices were rising and the fear of missing out was a strong emotion, however in a flat or falling market, that may not be the case," he says.

For those reasons, Mr Hearne believes the Help to Buy loan is most advantageous to those who expect a significant increase in income during the five-year term.