Year 6: what you'll pay when interest starts
Year 6 is the same for everyone, regardless of when you completed or which formula applies to your loan. The starting interest rate is a flat 1.75% per year, charged on your original equity loan amount — not the current value of your property.
This is probably lower than you feared. The sting doesn't come in year 6. It comes from the compounding escalation that kicks in from year 7 onwards — and the fact that these payments don't reduce what you owe by a single penny.
Year 6 monthly payments at 1.75%:
- £40,000 equity loan → £58/month (£700/year)
- £60,000 equity loan → £88/month (£1,050/year)
- £80,000 equity loan → £117/month (£1,400/year)
For many people, the year 6 bill feels manageable. That's by design — the structure front-loads the pain to later years. If you're in year 6, use this moment to model what years 7, 8, and beyond will cost before you decide to "wait and see."
Year 7: the first increase — and why it's steeper than you expect
From year 7 onwards, your rate increases each April using an inflation-linked formula. The exact formula depends on when you completed:
- Completed before April 2021: New rate = previous rate × (1 + RPI + 1%)
- Completed April 2021 onwards: New rate = previous rate × (1 + CPI + 2%)
With RPI at approximately 3.5%, that's a 4.5% increase in your rate year-on-year. With CPI at approximately 2.5%, the CPI+2% formula produces a similar 4.5% uplift. Both routes lead to roughly the same escalation.
On a £40,000 loan: year 6 costs £700. Year 7 costs approximately £732. The difference seems small — an extra £2.67/month. But the compounding means each subsequent year's increase is bigger than the last.
“Year 7 just hit and I'm paying £61 a month now. That's an extra £36 a year over year 6, which sounds fine, but I've done the maths out to year 15 and it's genuinely alarming.”
Year 8: where the compounding really starts to hurt
By year 8, borrowers who completed in 2018 are now paying approximately 1.91% (pre-April 2021 formula). That's £64/month on a £40,000 loan, £96 on £60,000, and £127 on £80,000.
On its own, that sounds bearable. But consider the cumulative picture: from year 6 to the end of year 8, a borrower with a £40,000 equity loan has paid approximately £2,198 in pure interest. Nothing off the balance. Not a penny of equity built. The government still owns exactly the same percentage of your home as when you bought.
“The monthly payment itself is fine. But I've just realised I've paid over £2,000 in interest and my loan hasn't gone down at all. I own exactly the same percentage as I did in year 1.”
Year-by-year escalation: the full picture
Completed before April 2021 (RPI + 1% formula, RPI assumed 3.5%):
| Year | Rate | £40k/mo | £60k/mo | £80k/mo | Cum. (£40k) |
|---|---|---|---|---|---|
| 5 | Free | £1/mo | £1/mo | £1/mo | — |
| 6 | 1.75% | £58 | £88 | £117 | £700 |
| 7 | 1.83% | £61 | £92 | £122 | £1,432 |
| 8 | 1.91% | £64 | £96 | £127 | £2,198 |
| 9 | 2.00% | £67 | £100 | £133 | £2,998 |
| 10 | 2.09% | £70 | £105 | £140 | £3,834 |
Years 6–8 highlighted. Cumulative column shows total paid since year 6 on a £40k loan.
Completed April 2021 onwards (CPI + 2% formula, CPI assumed 2.5%):
| Year | Rate | £40k/mo | £60k/mo | £80k/mo | Cum. (£40k) |
|---|---|---|---|---|---|
| 5 | Free | £1/mo | £1/mo | £1/mo | — |
| 6 | 1.75% | £58 | £88 | £117 | £700 |
| 7 | 1.84% | £61 | £92 | £123 | £1,432 |
| 8 | 1.93% | £64 | £97 | £129 | £2,201 |
| 9 | 2.03% | £68 | £102 | £135 | £3,017 |
| 10 | 2.13% | £71 | £107 | £142 | £3,873 |
Figures are estimates. Your exact rate depends on the actual inflation index published by ONS. Calculate your exact figures →
How Help to Buy interest compares to just adding it to your mortgage
This is the comparison that makes many people act. If you took out a repayment mortgage for the same amount as your equity loan, you'd pay a similar or slightly higher monthly amount — but crucially, you'd be paying off the debt, not just servicing interest on a balance that never falls.
Here's a rough comparison at year 8, assuming a repayment mortgage at 5.5% over 25 years:
| Equity loan size | HTB interest (yr 8) | HTB cost yrs 6–8 | Mortgage equivalent | Key difference |
|---|---|---|---|---|
| £40,000 | £64/mo | £2,198 | ~£55–70/mo at 5.5% over 25yr | Mortgage repays capital; HTB payments do not |
| £60,000 | £96/mo | £3,297 | ~£83–105/mo at 5.5% over 25yr | Mortgage repays capital; HTB payments do not |
| £80,000 | £127/mo | £4,396 | ~£110–140/mo at 5.5% over 25yr | Mortgage repays capital; HTB payments do not |
The monthly cost of keeping the equity loan vs rolling it into your mortgage is often surprisingly similar. But the difference in what you get for that money is enormous: with a remortgage, you're buying down debt with every payment. With HTB interest, you're paying for the privilege of continuing to owe the same amount — while that amount grows in real value as your property appreciates.
“I always assumed remortgaging would cost loads more per month. When I actually ran the numbers the difference was about £20/month — for which I'd actually start owning my home properly.”
Why the compounding matters more than the monthly amount
Lots of HTB holders focus on whether they can afford this month's payment. That's understandable, but it misses the bigger picture. Here's a concrete illustration:
On a £60,000 equity loan (pre-April 2021), assuming RPI stays around 3.5%:
- Year 6: £88/month, £1,050/year
- Year 10: ~£105/month, ~£1,260/year
- Year 15: ~£130/month, ~£1,565/year
- Total paid years 6–15: approximately £12,500 — and your loan balance is still £60,000 (or higher, if your property has appreciated)
That £12,500 paid over a decade is money gone. It doesn't reduce what you owe. It doesn't build equity. It's the cost of inaction — and it grows every year you wait.
What you should actually do about it
If you're in years 6, 7, or 8, you're still early enough that acting now significantly reduces your lifetime cost. The main options:
- Remortgage to redeem — Pay off the full equity loan by remortgaging. The most comprehensive solution. Requires sufficient equity and income to qualify. Read the full guide →
- Staircase — Partially repay to reduce your equity loan percentage and cut your ongoing interest bill. Read the staircasing guide →
- Model the cost of waiting — Use the calculator to see what years 9, 10, and 15 look like, and compare it to the cost of acting now.
→ Enter your loan details and see your personal escalation table, with an option comparison