Sadiq Khan calls on Help to Buy loan payment freeze to stave off mortgage crisis
By Noah Vickers, Local Democracy Reporter
Sadiq Khan has called on the Government to freeze Help to Buy loan payments, as he warned of the capital’s deepening mortgage crisis.
The mayor said the city’s homeowners now face huge increases in their monthly housing costs, and that those who used Help to Buy were at particular risk of defaulting on their mortgages.
The Government said that supporting homeowners is one of its priorities.
New City Hall analysis has revealed that up to 4,500 London homeowners with a Help to Buy loan are being financially squeezed because they face a combination of higher interest rates on their mortgages and Help to Buy loan repayments, as interest-free grace periods come to an end.
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.
City Hall’s study shows that a typical London first-time buyer who bought their home through Help to Buy in 2017/18 could be paying an extra £900 a month in payments, comprising £638 in higher mortgage interest payments and £275 to the Government in extra Help to Buy payments.
Mr Khan said ministers should consider keeping the interest-free grace period in place for longer.
“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,” the mayor said.
“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.”
A spokesman at the Department for Levelling Up, Housing and Communities said in response: “We offer a range of options to support Help to Buy customers facing financial hardship and encourage anyone in this position to contact the Mortgage Administrator straightaway to discuss their case and agree a plan.
“The Help to Buy equity loan is interest free for the first five years and, afterwards, a monthly interest fee of 1.75 per cent of the loan is payable, which is a significantly lower rate than current mortgage products”.
Pictured top: Mayor of London Sadiq Khan (Picture: Noah Vickers)
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