Ellie Sutton, 38, bought her first home with her husband in Streatham, south London, using a Help to Buy loan five-and-a-half years ago.
“I think we were lulled into a false sense of security with it,” said Ms Sutton, a director of a mangement consultancy, who describes herself as “fairly fiscally astute”. The loan is interest-free for the first five years. In the sixth year, borrowers are charged interest at a rate of 1.75 per cent. This charge increases each April by adding RPI plus 1 per cent.
Now housing experts are sounding the alarm that people who purchased homes using the Help to Buy scheme are most exposed to rising interest rates, as they are exposed to the double-whammy of rising loan repayments and soaring mortgage costs at a time when house prices are falling. As it stands, Ms Sutton is trapped making interest-only payments to the Government due to the strict rules around repaying the Help to Buy loan.