Mayor calls on Government to freeze Help to Buy loan payments as mortgage crisis deepens

• New City Hall analysis shows up to 4,500 London homeowners are at risk of financial hardship as mortgage costs continue to rise and the Help to Buy loan grace periods end 
• Thousands of London homeowners could see their monthly bill rise by up to £900 a month as a result of higher interest rates and expensive Help to Buy payments  
• By introducing a payment holiday, London homeowners with a Help to Buy loan could save on average £3,300 a year
• Mayor calls on the Government to urgently freeze Help to Buy payments, ‘giving people breathing space when they need it most’

The Mayor of London, Sadiq Khan, is today calling for urgent support for the capital’s homeowners who have used the Government’s Help to Buy scheme and now face huge increases in their monthly housing costs.

New City Hall analysis reveals that up to 4,500 London homeowners with a Help to Buy loan are being financially squeezed as they face a double whammy of higher interest rates on their mortgages and expensive Help to Buy loan repayments as the fee-free grace periods come to an end.  

Without action, there is a risk of these over-stretched homeowners in London defaulting on their monthly repayments as costs continue to soar. Those in the capital who have bought their home through Help to Buy and are coming to the end of the interest-free grace period on their Government loan are now having to pay rising costs on two loans.

The Mayor is specifically calling for the Government to consider options including suspending or freezing Help to Buy loan payments for a limited time so that Londoners have the financial breathing space they need to make ends meet until interest rates come down.

The Government's Help to Buy scheme enables first-time buyers to put down a 5 per cent deposit on a new-build home. Under the scheme, first-time buyers in London can borrow 40 per cent of the purchase price interest-free for five years.

The analysis shows that a typical London first-time buyer who bought their home through the Government’s Help to Buy scheme in 2017/18 could be paying an extra £900 a month in payments, comprised of £638 in higher mortgage interest payments and £275 to the Government in extra Help to Buy payments. [1] 

A recent report for the Joseph Rowntree Foundation also identified London’s first-time buyers, especially those who bought through Help to Buy, as particularly vulnerable to rising mortgage interest rates. [2] 

The Help to Buy scheme is widely expected to make a profit [3], and there has been negligible improvement in the high rate of mortgage costs ever since the mini-Budget was introduced last year, so the Mayor is urging the Government to provide swift financial relief to the thousands of London homeowners with a Help to Buy loan.  

Despite recent years seeing the highest level of housing completions in London since the 1930s, more than a decade of Government austerity and inaction on housing costs has meant that London remains one of the most expensive places in the UK to live and buy a home. The Mayor has been vocal about the consequences of spiralling mortgage rates and the cost-of-living crisis for London’s homeowners, and recently warned that over 200,000 London homeowners could face a mortgage ‘bomb’ next year. Previous polling for City Hall revealed that the mortgage crisis has already taken hold in the capital as more than a third (34 per cent) of Londoners say they will struggle to pay their mortgage in the next six months. [4]  

By the Government introducing a payment holiday, London homeowners with a Help to Buy loan could save on average £3,300 a year, freeing up funds for other essential spending such as rising food, gas and electricity, fuel, and mortgage costs.  

The Mayor of London, Sadiq Khan, said: “People in London using Help to Buy may be on the housing ladder, but many are on low pay and facing growing levels of economic insecurity.

“As Help to Buy grace periods come to an end and mortgage rates continue to rise, thousands of London’s recent first-time buyers are facing huge increased in their monthly payments.

“Ministers could do something to support these households straight away, by suspending or freezing Help to Buy loan payments, giving people breathing space when they need it most.”

Paula Higgins, Chief Executive of HomeOwners Alliance, said: “The Government can't hang vulnerable new homeowners out to dry. Homebuyers that purchased through the Help to Buy scheme are facing a barrage of soaring costs. Freezing the loan payments as the Mayor suggests could have a significant impact on desperate household budgets at this time.

“In the meantime, homeowners worried about their monthly mortgage payments shouldn't bury their heads in the sand. HomeOwners Alliance has lots of helpful resources for homeowners, so I strongly encourage Londoners struggling with their mortgage repayments to visit the site.”

ENDS