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Should you use Help to Buy or get a 95% mortgage?

Understand the pros and cons of the government's flagship scheme

Every year, thousands of first-time buyers use the government’s Help to Buy scheme to get on to the property ladder – but could you be better off with a 95% mortgage instead?

By the end up 2017, nearly 160,000 people – including 128,000 first-time buyers – had used Help to Buy equity loans to purchase a home, but the scheme has been blamed for inflating house prices, and some buyers have encountered difficulties remortgaging.

Here, we take a look at the cost of Help to Buy mortgages compared to 95% mortgages, and weigh up the pros and cons of the popular scheme.

  • If you’re buying your first home and need help finding the right mortgage, call Which? Mortgage Advisers on 0800 2942 849 for impartial, expert advice.

Help to Buy equity loans

With Help to Buy, the government provides first-time buyers with a 20% equity loan (or 40% in London), which means they’ll only need a 5% deposit and 75% mortgage to buy a property.

While this allows buyers to unlock better rates, the choice of property is limited, as Help to Buy only applies to new-build homes priced up to £600,000.

On top of this, the equity loan starts gaining interest after five years.

  • Learn more about equity loans in our guide on Help to Buy.

Help to Buy mortgages v 95% mortgages

We’ve taken a look at the best initial rates currently available on Help to Buy mortgages and traditional 95% mortgages.

The tables below show that, in the popular two- and five-year fixed-rate markets, Help to Buy deals offer much cheaper initial rates, although their higher fees bump up the overall cost of borrowing (known as the APRC).

Two-year fixed-rate deals

In the two-year market, the difference between the cheapest 75% Help to Buy mortgage and standard 95% mortgages is around 1.3% – a significant sum over the course of the loan.

Help to Buy mortgages (75% loan-to-value)

Lender Initial rate Revert rate Fees APRC
Barclays 1.61% 3.99% (Base rate +3.49%) £749 3.7%
Leeds Building Society 1.64% 4.69% £1,999 4.9%
Santander 1.69% 3.75% £999 3.5%


95% mortgages

Lender Initial rate Revert rate Fees APRC
Marsden Building Society* 2.89% 5.95% £299+0.5% of loan 5.6%
Nottingham Building Society* 2.89% 5.49% £999 5.2%
Atom Bank 3.09% 3.75% £0 3.7%

*only available in England and Wales

Five-year fixed-rate deals

For those fixing for longer, it’s a similar tale – with the lowest Help to Buy rates around 1.1% cheaper than 95% mortgages.

Help to Buy mortgages (75% loan-to-value)

Lender Initial rate Revert rate Fees APRC
Barclays 2.19% 3.99% £749 3.4%
Natwest 2.19% 3.99% £995 3.4%
Royal Bank of Scotland 2.19% 3.99% £995 3.4%


Traditional 95% mortgages

Lender Initial rate Revert rate Fees APRC
Atom Bank 3.29% 3.75% £0 3.6%
Sainsbury’s Bank 3.29% 4.24% £0 4.1%
Monmouthshire Building Society* 3.70% 4.99% £0 4.6%

*only available in England and Wales


So is Help to Buy the best bet?

While Help to Buy mortgages are cheaper, there are a couple of significant downsides to using the scheme.

Help to Buy and the new-build premium

One of the main benefits of Help to Buy is that you move in to a brand new home – but this can also be its biggest drawback.

New-build homes tend to be significantly more expensive than existing properties, and the popularity of Help to Buy may be increasing demand, pushing the price up further.

The chart below shows how the median prices paid by first-time buyers using Help to Buy has increased since its launch.

The rate of this uptick in price is perhaps the most concerning element, with first-time buyers using Help to Buy in the final quarter of 2017 paying almost £20,000 more than those who bought a year earlier.

Purchase period Median increase in price for first-time buyers
Q4 2013 – Q4 2014 £8,955
Q4 2014 – Q4 2015 £16,048
Q4 2015 – Q4 2016 £24,002
Q4 2016- Q4 2017 £19,950

If you’re able to buy an older home at a smaller price, you may save money with a 95% mortgage, even paying a higher interest rate.

Cost of repaying the government loan

Unlike a mortgage, where you borrow a set sum, the government loan is in exchange for a 20% share in your property value. This means, as your home’s value increases, your loan amount does as well.

If you sell before repaying your loan, you’ll need to pay off the outstanding amount on your mortgage, as well as the government’s 20% share of the value, which could leave you with relatively modest equity growth.

The first five years are interest-free, but, after that, you’ll need to factor in paying both your mortgage and interest on the Help to Buy loan.

Remortgaging Help to Buy properties

The outstanding equity loan can be a problem when you reach the end of the fixed term on your mortgage, too.

Many lenders don’t offer specific remortgaging products for people with Help to Buy equity loans, and some will only allow you to remortgage if you pay off the full equity loan when doing so.

If you choose to do this, you’ll also need to factor in legal and valuation costs, and will have to obtain permission from the Help to Buy agent.

Are 95% mortgages attractive?

While 95% mortgages are more expensive on paper, they allow you to access properties to older properties.

In recent months, 95% mortgage deals have been getting cheaper, bucking the trend of interest rate rises seen at lower loan-to-value ratios.

Last month, the average cost of a two-year fixed-rate deal at 95% dropped to 4.06%, with five year products at 4.43%.

Alongside this, more lenders are now offering 95% products, with challenger brands such as Atom Bank launching highly competitive rates.

  • For more information, check out our full guide on 95% mortgages.

Can you save a bigger deposit?

Even if you have your 5% deposit saved, it might be worth considering holding off and saving a little more before buying your first property.

That’s because buyers with a 10% deposit can access significantly better rates than those with 5%.

As shown in the tables below, the cheapest two-year fixed-rates drop by 1.15% for those with a bigger deposit, while five-year deals are 0.8% cheaper.

90% two-year fixed-rate mortgages

Lender Initial rate Revert rate Fees APRC
HSBC 1.74% 3.94% £999 3.7%
Yorkshire Building Society 1.81% 4.99% £495 4.5%
Sainsbury’s Bank 1.84% 4.24% £995 3.9%


90% five-year fixed-rate mortgages

Lender Initial rate Revert rate Fees APRC
First Direct 2.19% 3.94% £490 3.3%
Atom Bank 2.29% 3.75% £900 3.5%
Skipton Building Society 2.31% 4.74% £1,995 3.9%

All mortgage data used in this article is from Moneyfacts. Deals are available across the UK, unless otherwise stated. Some products are only available either through intermediaries or directly through lenders.

Getting advice on your mortgage options

If you’re considering getting on to the property ladder, it can help to get advice from a whole-of-market mortgage broker, who can talk you through your options.

You can fill out the form below for a free call back from an adviser.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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