The number of people buying homes through Help to Buy is at an all-time high, according to the latest Government figures – but rising house prices mean users could pay back thousands more than they borrowed.

The latest Help to Buy statistics show that in the financial year 2020-21, more than 55,600 households bought their home with the support of a Help to Buy equity loan.

This was an 8 per cent increase compared to the previous year, as first-time buyers joined in the home-purchasing boom.

On the ladder: First-time buyers used a record number of Help to Buy loans in 2020-21

On the ladder: First-time buyers used a record number of Help to Buy loans in 2020-21

On the ladder: First-time buyers used a record number of Help to Buy loans in 2020-21

The average price first-time buyers paid for their home was £290,000, above the national average of around £255,000, and their typical household income was just over £55,000.

A total of 328,506 households have now purchased a home using the scheme since it was introduced in 2013.

More than a half of those purchases were made with a deposit of 5 per cent of the property purchase price or less, and 23 per cent with a deposit ranging between 5 per cent and 10 per cent.

With the scheme set to end in 2023, buyers may be looking to get in under the wire – although the new First Homes scheme could also help them get on the ladder with Government support. 

What is a Help to Buy: Equity Loan? 

First-time buyers can use the Help to Buy Equity Loan scheme to purchase a new-build property up to the value of £600,000, with a maximum equity loan of £120,000 (20 per cent). In Greater London, the maximum equity loan is £240,000 (40 per cent).

The Government lends borrowers a portion of the purchase price interest-free for five years, allowing them to boost their deposit and get a better mortgage rate.

After five years, borrowers must either pay the Government back the current market value of their stake, or start paying interest. They can also repay early if they choose. 

The interest rate starts at 1.75 per cent in year six, and after that it rises in line with the Retail Price Index measure of inflation plus 1 per cent each year.

So someone who bought a £200,000 home with a 20 per cent (£40,000) Help to Buy equity loan would pay £712 interest in year six, and in year 10 they would pay £896 – on top of mortgage payments.

The scheme has run since 2013 and will continue until 2023.

New restrictions were introduced this year which means it is now only open to first-time buyers, and there are regional limits meaning homes purchased must cost no more than 1.5 times the average first time buyer property price in that area.


Though the equity loan scheme has helped buyers get on the ladder at a time when house prices have risen by £23,000 in a year, past users of Help to Buy are being warned that those same house price increases could mean they end up paying back much more than they borrowed.

Property inflation has made life particularly difficult for first-time buyers, who need to save higher deposits without the benefit of increased equity in an existing property that home movers have.

The equity loan helps with that, but because of its structure, house price rises mean borrowers end up paying back more.

Instead of loans being a set amount borrowed, as a mortgage would be, Help to Buy loans are taken as a stake in the property – meaning that as a home rises in value, so too does the amount needing to eventually be repaid to the state.

Sarah Coles, personal finance analyst at Hargreaves Lansdown said: ‘Help to Buy equity loans provide an answer to the impossible question of how to buy in a rapidly rising property market. 

‘Most people who use them have a 5 per cent deposit, and the scheme stops them battling to raise a bigger percentage of the property price at a time when the average property rose more than £27,000 in a year.

‘However, while Help to Buy loans offer a solution to those struggling to buy in a rising market, the way they work means the same rising market will have a sting in the tail for anyone who takes advantage.

‘When the loan is eventually repaid to the Government, the amount that needs to be paid back depends on the value of the house at that time. If you borrow 20 per cent of the purchase price, you repay 20 per cent of the value after five years, so when prices rise, so do your repayments.’

According to Hargreaves Lansdown’s analysis, if a buyer borrowed 20 per cent from the Government to buy the average property in May 2015, and then repaid the loan in May 2020, they would have to pay back £5,318 more than they borrowed.

The rising market in the past 12 months means that someone doing the same a year later would have had to repay £8,751 more than they borrowed – so the rising market would have cost them almost £3,500.

Buyers rushed to cash in Help to Buy Isas ahead of stamp duty deadline

The Government has also published figures on take-up of the Help to Buy Isa. 

This is a scheme where the Government tops up deposit savings with a 25 per cent ‘bonus,’ up to a limit of £3,000, at the point that a borrower buys their home. 

The data showed that 12,870 bonuses were paid in March 2021 – a 25 per cent increase on the previous month. This may reflect buyers racing to meet the stamp duty holiday deadline, which was initially set to be in March but was subsequently extended until June. 

Use of Help to Buy Isa bonuses also spiked last year amid the house purchasing boom

Use of Help to Buy Isa bonuses also spiked last year amid the house purchasing boom

Use of Help to Buy Isa bonuses also spiked last year amid the house purchasing boom 

The bonuses were used to buy 9,904 properties, compared to 7,297 in February.

The mean value of a property completion in the Help to Buy Isa scheme between December 2015 and March 2021 was £175,010, compared to the average first-time buyer price of £214,452 and the average UK house price of £256,405.

Although Help to Buy can be used on properties up to £450,000, only 29,000 or 5 per cent of the 539,000 homes bought under the scheme have been worth more than £250,000.

This reflects the fact that most completions in the scheme have been on properties outside London, in regions where house prices are typically lower.

Applications for new Help to Buy Isas closed in 2019, but existing borrowers can still save into the scheme and claim their bonuses until 2030. 

New savers can also use a Lifetime Isa to get a Government bonus on their savings if they are using them to buy their first home.

Says Coles: ‘If you’re working hard to build a deposit, a Help to Buy equity loan isn’t your only option. 

‘If you’re aged 18-39, and you plan to buy your first property a year or more down the line, you could also consider saving at least some of the deposit in a Lifetime Isa. 

‘You can put £4,000 a year into a Lisa and the government will immediately top it up by 25 per cent – so you could get £1,000 a year from the Government to help you onto the property ladder. And through the Lisa, this never needs to be paid back.’

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