Help to Buy allows first time buyers to borrow up to 20 per cent of the value of a new build home, which is interest free for five years, but must be repaid upon the sale of the property. The amount repayable is 20 per cent of the sale price rather than the purchase price.
The first borrowers who took put loans at the start of the scheme in 2013 are now due to begin paying interest. Across the country many are able to sell their homes and repay the loan out of the growth in value - with money left over.
But according to analysis by independent mortgage broker Private Finance, Barnsley’s Help to Buy borrowers are among the least likely to be in that position - with some facing a shortfall of several thousand if they sell their home.
According to the analysis, Barnsley property values have increased by an average of just 19 per cent over the five years, compared to more than 40 per cent in many parts of the country and more than 60 per cent in several London boroughs.
Shaun Church, director at Private Finance, said: “Original adopters of the Help to Buy equity loan scheme are about to see their interest holiday come to an end. With five years having passed since scheme was created, it’s likely some of these borrowers are now looking to move up the property ladder, and the prospect of paying interest on their loan may give them the push they need.
“Many Help to Buy homeowners will have experienced significant house price growth since they first took out their loan, but it’s a postcode lottery as to how much they will have left to play with once their equity loan is repaid. While most have done very well out of the scheme, our research shows that buyers in some areas, particularly in the North, are at risk of the amount they must repay outweighing their capital gains.
“There are also challenges for those who want to stay in their Help to Buy home but switch to a different mortgage deal, as not all lenders under the scheme offer remortgage products. Help to Buy homeowners who are wondering what their next steps should be would benefit from seeking advice from an independent mortgage adviser who can explain their options.”