The Help to Buy initiative has helped thousands take their first steps on the housing ladder since it launched on April 1 2013, according to government data.

However, many of those who used the scheme in its first year are now facing higher fees, while those in the second year are facing fees for the first time.

According to Paul Flavin mortgage adviser at online mortgage broker, mortgages online: “The first five years of the Help to Buy equity loan is interest-free.

After the interest-free years, clients will be charged 1.75% on the outstanding amount as an interest only payment. This charge will increase each year by Retail Price Index (RPI) plus 1%.

“For those that first entered the scheme they are now paying interest on the equity loan & have just had the first increase. With 211,000 people now having purchased through the scheme the number that will soon see either an initial charge or an increase in charge is going to rapidly grow.

The average Help to Buy loan is £55,000 so, for those coming to the end of their initial five-year period, the 1.75% interest charge equates to £80 per month on top of their current mortgage payment.

“For those just entering their second increase the monthly payments would have increased by more than £126 per month since they started paying for the equity loan. In London an equity loan was available for up to 40% of a maximum purchase price of £600,000. This would mean, if you took the maximum equity loan available (£240,000) you can expect to pay £875 per month for the equity loan in addition to your monthly mortgage payment.”

The Mortgage Advice Club is urging advisers to start talking to their Help to Buy clients, in an article in FT Adviser.

Rob McCoy, senior product and business manager at TMA, said: “The Help to Buy scheme has undoubtedly been instrumental in helping many borrowers take their first steps onto the housing ladder.

“However, starting to repay the monthly interest on the equity loan after the initial five-year period is a detail often overlooked by many and we are increasingly beginning to hear that consumers don’t understand the implications of this.”

McCoy said he was encouraging advisers to contact clients who could be affected by this and stressed there were plenty of avenues borrowers could take to secure the best deal with this accumulation of interest.”

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