Is Help to Buy (or Similar Schemes) a Good Idea for First-Time Buyers?

Buying a home in London or anywhere in the UK is a daunting task, especially for first-time buyers facing high property prices and strict mortgage requirements. Government-backed schemes like Help to Buy (which ended in England in 2023 but still operates in some parts of the UK) aimed to make homeownership more accessible. But was it really a good idea? And are similar schemes like Shared Ownership or the First Homes Scheme worth considering today?

Let’s break it down.

What Was Help to Buy?

The Help to Buy: Equity Loan scheme allowed first-time buyers to purchase a new-build home with just a 5% deposit, with the government lending up to 40% of the property price in London (20% elsewhere in England) interest-free for five years. After this period, interest payments kicked in, starting at 1.75% and increasing annually.

Though the scheme ended in England, similar initiatives still exist in Wales and Scotland, and alternatives like Shared Ownership or Deposit Unlock are now available.

The Pros: Why Help to Buy Was Attractive

✅ Lower Deposit Requirement

Buyers only needed 5% of the purchase price upfront, making homeownership more achievable.

✅ Interest-Free for Five Years

The government loan didn’t charge interest for five years, keeping initial costs low.

✅ Better Mortgage Rates

Since buyers only needed a mortgage for 55-75% of the home’s value (with the government covering the rest), lenders offered lower interest rates compared to a 95% mortgage.

✅ Increased Buying Power

Buyers could afford more expensive homes than they would with a traditional mortgage alone.

The Cons: The Hidden Drawbacks of Help to Buy

❌ Limited to New-Builds

The scheme only applied to new-build properties, which often come with a higher price tag and can lose value quickly (similar to a new car depreciating once driven off the lot).

❌ Interest Charges After Five Years

Once the interest-free period ended, buyers had to start repaying the government loan, and the interest increased annually. This could lead to unexpected financial strain.

❌ Difficulties When Selling

When selling, the government took the same percentage as the original loan. If your home increased in value, you owed more than you originally borrowed.

❌ Risk of Negative Equity

Since new-builds often lose value in the first few years, some buyers found themselves in negative equity, meaning they owed more on their mortgage than their home was worth.

Alternatives to Help to Buy in 2024

Since Help to Buy is no longer available in England, what are the best options for first-time buyers today?

1️⃣ Shared Ownership

Buy a percentage of a home (usually 25-75%) and pay rent on the remaining share.
Allows you to increase your ownership over time (“staircasing”).
Ideal if you can’t afford a full mortgage but want to get on the property ladder.

2️⃣ First Homes Scheme

Offers first-time buyers a 30-50% discount on new-build properties.
Available to key workers and lower-income buyers.
Buyers must live in the property as their main home (no renting it out).

3️⃣ Lifetime ISA (LISA)

A savings account where the government adds a 25% bonus (up to £1,000 per year) to help with a deposit.
Best for those planning to save for a few years before buying.

4️⃣ Deposit Unlock

Allows buyers to purchase a new-build home with just 5% deposit—but without the government loan.
A good alternative for those looking at new-build properties.

So, Is Help to Buy (or Similar Schemes) a Good Idea?

✔ It’s a good idea if…

✅ You need help with a deposit and wouldn’t be able to buy otherwise.

✅ You can afford mortgage repayments even after the interest-free period ends.

✅ You plan to stay in the home long-term, reducing the risk of negative equity.

✖ It’s not a good idea if…

❌ You want flexibility to buy any property, not just new-builds.

❌ You worry about rising interest rates after the five-year period.

❌ You plan to sell within a few years—as new-builds can lose value at first.

For many buyers, Help to Buy (and similar schemes) provided a way onto the property ladder but came with long-term risks. If you're considering alternatives, it's crucial to weigh the immediate benefits against potential future costs.

Final Tip: Do Your Research & Get Advice

Whether you’re looking at Shared Ownership, First Homes, or a traditional mortgage, it’s essential to compare your options and speak to a mortgage broker. Every buyer’s situation is different, and the best scheme for one person might not be the right choice for another.

Would you consider using one of these schemes to buy your first home? Let me know in the comments!