The five-year cliff
For the first five years of your Help to Buy equity loan, you pay nothing except a £1 per month management fee. It feels free. Then year 6 arrives, and interest kicks in at 1.75% of the original loan amount.
That first year of interest might feel manageable. On a £40,000 equity loan, it's around £58 per month. But here's what catches people out: the rate increases every single year after that, and each increase builds on the previous year's higher rate. It compounds.
This is the "cliff" that over 52,000 buyers from 2018 alone have now hit. Many had no idea what was coming.
How the interest rate is calculated
In year 6, the rate is a flat 1.75%. From year 7 onwards, it increases annually using this formula:
The inflation index and adjustment depend on when you completed:
- Completed before April 2021: Retail Price Index (RPI) + 1%
- Completed April 2021 onwards: Consumer Price Index (CPI) + 2%
The critical thing to understand is that the rate always goes up. Even if inflation were zero, the +1% or +2% adjustment guarantees an increase every year. There is no mechanism for the rate to decrease.
RPI has historically run at around 3-4%, while CPI typically runs 1-2% lower. But the +2% adjustment on CPI completions means both formulas produce similar escalation rates in practice.
Worked example with real numbers
Let's take a concrete example: you bought a £200,000 property with a 20% equity loan (£40,000), completed before April 2021, with RPI assumed at 3.5%.
Interest is calculated on the original loan amount of £40,000. Here's what the escalation looks like:
| Year | Rate | Monthly | Annual | Cumulative |
|---|---|---|---|---|
| 6 | 1.75% | £58 | £700 | £700 |
| 7 | 1.83% | £61 | £732 | £1,432 |
| 8 | 1.91% | £64 | £766 | £2,198 |
| 9 | 2.00% | £67 | £800 | £2,998 |
| 10 | 2.09% | £70 | £836 | £3,834 |
| 11 | 2.18% | £73 | £874 | £4,708 |
| 12 | 2.28% | £76 | £914 | £5,622 |
| 13 | 2.39% | £80 | £956 | £6,578 |
| 14 | 2.50% | £83 | £1,000 | £7,578 |
| 15 | 2.61% | £87 | £1,046 | £8,624 |
After 10 years of paying interest, you'd have paid over £8,600 — and the rate keeps climbing. None of these payments reduce what you owe. They're pure interest.
Enter your own numbers into the calculator to see your personal escalation table →
"But I thought I only borrowed £40k"
This is the single most common misconception about Help to Buy. You didn't borrow a fixed amount of money — you borrowed a percentage of your property's value.
If you bought at £200,000 with a 20% equity loan, you borrowed £40,000. But if your property is now worth £260,000, you owe 20% of £260,000 = £52,000 to redeem. The government's share grew with your property.
This works both ways — if your property has fallen in value, you owe less. But for most people who bought between 2013-2022, property values have risen, often significantly.
“How do we pay off help to buy now the value and subsequently how much we owe them has risen so much?”
The interest payments (£58/month etc. from the table above) are calculated on the original purchase price. But the redemption amount is based on the current value. This distinction is important — and often confusing.
Read our full guide: How Much Is My Help to Buy Loan Worth Now? →
What early borrowers are paying right now
Help to Buy launched in 2013. People who completed in those early years are now in year 11, 12, or 13 of their loan. The escalation has had time to compound significantly.
Here's what someone with a £40,000 equity loan (pre-2021 completion, RPI at ~3.5%) is approximately paying, based on when they completed:
| Completed | Year now | Rate | Monthly | Total paid since yr 6 |
|---|---|---|---|---|
| 2013 | 13 | ~2.39% | ~£80 | ~£6,578 |
| 2014 | 12 | ~2.28% | ~£76 | ~£5,622 |
| 2015 | 11 | ~2.18% | ~£73 | ~£4,708 |
| 2016 | 10 | ~2.09% | ~£70 | ~£3,834 |
Figures are approximate, based on constant RPI of 3.5%. Actual amounts vary based on real inflation data. Use the calculator for your exact figures.
A 2013 borrower with a £40,000 loan has now paid around £6,500 in interest alone — and none of that has reduced their loan balance. They still owe the full 20% of their property's current value.
What Help to Buy borrowers are saying
These are real questions from people dealing with Help to Buy interest escalation. If they sound familiar, you're not alone.
“How much do you actually pay back on the equity loan per month/annum? I can't find a straight answer anywhere.”
“We will never repay in the 13 years we have left on the mortgage. Not really sure what will happen once the mortgage is paid and we haven't paid help to buy off!!”
“The major problem is that interest repayments will increase annually.”
What you can do about it
You have four main options, and the best choice depends on your specific situation:
- Remortgage to redeem — Pay off the equity loan entirely by rolling it into your mortgage. Usually the best long-term option if you qualify. Read our remortgaging guide →
- Partial staircasing — Pay off at least 10% of your property's current value to reduce the equity loan percentage and your ongoing interest. Read our staircasing guide →
- Keep paying — Continue making escalating interest payments. This costs the most long-term but requires no action or upfront money.
- Sell — The equity loan is repaid from sale proceeds. Read our selling guide →
The right answer depends on your property value, equity, income, mortgage rate, and how long you plan to stay. Our calculator compares these options side by side using your actual numbers.