New analysis from independent mortgage broker Private Finance reveals the areas of the country where original Help to Buy borrowers (who took out an equity loan when the scheme began in 2013) are in the best position to repay their equity loan and still benefit from capital gains when moving home.
Original adopters of the scheme will start to incur interest on their loans this April, providing motivation for them to move up the property ladder. Borrowers in the scheme must repay 20% of the property value at the time of selling (rather than the original loan).
Among 51 ‘Help to Buy hotspots’ – the local authorities where 100 or more Help to Buy equity loans have been completed each year since the scheme was introduced – borrowers in Greenwich, Wokingham and Dartford are in the best position to pay off their equity loan and still benefit from capital gains.
In contrast, borrowers in County Durham, Stockton-on-Tees and Rochdale have seen much more modest house price growth, and as such face repaying loans that are larger than the capital gains earned in the past five years.
| Best 10 areas are as follows: | |||||||
| Local authority | Average equity loan in 2013 | Average first-time buyer house price 2013 | Average first-time buyer house price now (Dec 2017 data) | Average FTB house price growth 2013-18 | % rate of price growth | Original loan x rate of house price growth | House price growth minus new loan |
| Greenwich | £27,082 | £221,852 | £361,675 | £139,823 | 63.03% | £44,150 | £95,673 |
| Wokingham | £25,751 | £227,855 | £328,890 | £101,036 | 44.34% | £37,169 | £63,867 |
| Dartford | £29,473 | £171,701 | £276,425 | £104,724 | 60.99% | £47,449 | £57,275 |
| City of Bristol | £22,151 | £162,571 | £251,589 | £89,018 | 54.76% | £34,280 | £54,738 |
| Central Bedfordshire | £29,249 | £162,628 | £257,501 | £94,872 | 58.34% | £46,312 | £48,560 |
| Bedford | £28,598 | £150,698 | £242,101 | £91,403 | 60.65% | £45,943 | £45,460 |
| Horsham | £30,088 | £208,857 | £294,214 | £85,357 | 40.87% | £42,384 | £42,973 |
| Test Valley | £27,187 | £184,814 | £260,926 | £76,112 | 41.18% | £38,383 | £37,729 |
| Colchester | £26,836 | £150,697 | £224,037 | £73,341 | 48.67% | £39,897 | £33,444 |
| Cherwell | £25,430 | £184,272 | £248,372 | £64,100 | 34.79% | £34,276 | £29,824 |
| Worst 10 areas: | |||||||
| Local authority | Average equity loan in 2013 | Average first-time buyer house price 2013 | Average first-time buyer house price now (Dec 2017 data) | Average FTB house price growth 2013-18 | % rate of price growth | Original loan x rate of house price growth | House price growth minus new loan |
| County Durham | £23,320 | £84,172 | £89,690 | £5,518 | 6.56% | £24,849 | -£19,332 |
| Stockton-on-Tees | £26,679 | £102,409 | £114,508 | £12,099 | 11.81% | £29,831 | -£17,732 |
| Rochdale | £23,424 | £96,067 | £114,964 | £18,897 | 19.67% | £28,032 | -£9,135 |
| Sunderland | £16,385 | £91,123 | £100,427 | £9,304 | 10.21% | £18,058 | -£8,753 |
| Doncaster | £19,217 | £95,202 | £108,506 | £13,305 | 13.98% | £21,903 | -£8,598 |
| Barnsley | £21,144 | £86,919 | £103,656 | £16,737 | 19.26% | £25,216 | -£8,479 |
| Stoke-on-Trent | £20,081 | £79,492 | £97,957 | £18,464 | 23.23% | £24,745 | -£6,281 |
| Chorley | £21,512 | £120,526 | £139,313 | £18,787 | 15.59% | £24,865 | -£6,078 |
| Wolverhampton | £21,055 | £104,624 | £124,567 | £19,943 | 19.06% | £25,068 | -£5,125 |
| St Helens | £18,118 | £93,525 | £109,884 | £16,359 | 17.49% | £21,287 | -£4,928 |
Shaun Church, director at mortgage broker 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.”