Skip to Navigation

Regulator warns of help-to-buy equity loan risk

First-time buyers who used a help-to-buy equity loan to get on the property ladder are being warned over the risks of getting into negative equity.

The Financial Conduct Authority (FCA) claimed the scheme potentially exposes borrowers to any changes in economic conditions.

The FCA said:

"A stagnant housing market, combined with the new-build premium could see a reduced number of remortgage options relative to a non-help-to-buy property.

"They are also more likely to face negative equity if property prices begin to fall."

Buyers using the loan scheme can borrow up to 20% of the cost of a new-build home, or 40% in London, from the Government.

No loan fees apply for the first five years of owning the home, which results in buyers only requiring a 5% cash deposit and 75% mortgage.

By the end of 2018, the FCA said 211,000 consumers had used help-to-buy equity loan schemes to buy properties in the UK.

The help-to-buy equity loan scheme is set to continue for all borrowers until next year, and for first-time buyers until March 2023.

Last year, the National Audit Office warned the Government the scheme posed such a risk.

Talk to us about your personal finances.

Get free access to our online guides and business newswire