Understanding Help to Buy equity loan interest charges
When the Help to Buy: Equity Loan scheme was active, the government lent eligible buyers up to 20% of a new-build property's value (40% in London), interest-free for the first five years. From year 6, interest is charged at 1.75% per year on the original equity loan amount. From year 7, the rate increases annually in line with the Retail Prices Index (RPI) plus one percentage point for the older scheme, or CPI plus two percentage points for the 2021–2023 version.
This compounding mechanism means the rate can rise considerably over time. A borrower who entered the 2013–2021 scheme at 1.75% and experienced average RPI of 4% from year 7 onwards would see their rate exceed 2.5% within a few years, and continue rising. Understanding the trajectory of these charges is important for deciding whether to remain in the scheme, make a part-repayment, or repay the loan in full.
Part-repayments and how they change your interest base
After making a part-repayment, interest is no longer calculated on the original cash equity loan amount. Instead, it is charged on your remaining equity loan percentage × current market value at the time of each repayment. This distinction matters significantly if property values have risen: a borrower who originally had a £40,000 equity loan on a £200,000 property (20%) might now hold a 20% loan against a £300,000 property — meaning their interest base, even after a 10% repayment, could be calculated on a higher amount than the original cash figure.
A RICS valuation is required by Homes England to establish the property value for any part-repayment transaction. Use that same valuation figure in this calculator when you check the "I have made a part-repayment" option.
Should I repay my Help to Buy loan early?
There is no early repayment charge on the equity loan itself — unlike many mortgages. However, repayment requires a RICS valuation (typically £250–£600), and the amount owed is the equity loan percentage of the current property value, not the original cash amount. In a rising market, waiting to repay means repaying more in cash terms. The calculator above helps you estimate whether your ongoing interest charges are high enough to make early repayment financially worthwhile, though a mortgage broker or independent financial adviser can give personalised advice on this decision.
Frequently Asked Questions
When does my Help to Buy equity loan start charging interest?
Interest on a Help to Buy: Equity Loan begins in year 6 of ownership — that is, from the fifth anniversary of your purchase completion date. For the first five years, only a £1/month management fee is charged. There is no interest during this period.
What is the Help to Buy year 6 interest rate?
The interest rate in year 6 is fixed at 1.75% per year, applied to your original equity loan amount (the cash amount borrowed, not a percentage of current property value — unless you have made a part-repayment). From year 7 onwards, the rate increases each year in line with RPI plus 1 percentage point (2013–2021 scheme) or CPI plus 2 percentage points (2021–2023 scheme).
How is the Help to Buy interest rate calculated from year 7 onwards?
Each April from year 7, the annual interest rate increases by multiplying the previous year's rate by (1 + the relevant inflation index plus the scheme margin). For the 2013–2021 scheme this is the previous year's rate × (1 + (RPI + 1%) / 100). For the 2021–2023 scheme it is the previous year's rate × (1 + (CPI + 2%) / 100). This compounding means that even moderate inflation causes the rate to rise noticeably over time.
What happens to my Help to Buy interest if I make a part-repayment?
After a part-repayment, interest is no longer charged on the original cash equity loan amount. Instead, it is charged on your remaining equity loan percentage multiplied by the current market value of the property at the time of repayment (established via a RICS valuation). This means if property values have risen since your purchase, your interest base may be higher than the original loan even after a partial repayment.
Is the Help to Buy scheme still open to new applicants?
No. The Help to Buy: Equity Loan scheme in England closed to new applications on 31 March 2023. This calculator is intended exclusively for existing loanholders who want to estimate their ongoing interest charges. It is not an eligibility tool for new buyers.
How do I repay my Help to Buy equity loan?
You can repay the equity loan in full or in part at any time (minimum repayment thresholds apply — typically 10% of the property's current market value per repayment). Full repayment is usually triggered by selling the property or remortgaging. A RICS valuation is required by Homes England to establish the repayment amount. Contact Homes England or your equity loan scheme administrator to begin the repayment process.