Help to Buy version 2? Good intentions but flawed beneath the surface
Posted on: 28 September, 2026
A proposed scheme offering first-time buyers the chance to purchase a new-build home with just a 2.5% deposit sounds attractive. But Jordan Turner, senior lecturer in Real Estate at the University of the Built Environment, argues that beneath the headline figure, familiar problems around affordability, equity loans and long-term repayments remain. Take part in the poll below to have your say.
On 26 September, it was announced that the UK Government would be offering first-time buyers better opportunities to purchase their first homes by only requiring a 2.5% deposit, which would then essentially be topped up by a further 20% from the Government in the form of an equity loan.
What perhaps seems a welcome idea on the surface – and in theory – is full of cracks and impracticalities in reality.
Does a 2.5% deposit really make buying a home affordable?
It is firstly worth noting that the scheme only applies to new-build homes with developers who are signed up to the scheme. So, while only requiring a 2.5% deposit seems a bargain initially, the real figures start to show the issues that lie underneath.
According to the Office for National Statistics, the current UK average house price is £273,000 when accounting for all property sales. However, when considering new builds alone, the average price in England is £381,000.
Even taking a halfway approach here at £327,000 would still require a deposit of £8,175. Now, of course, saving £8,175 is certainly more attractive than the typical 10%, which in this example would sit at £32,700. But challenges still remain in trying to save even that smaller amount of money, which is still a big task in itself.
Haven’t we been here before with Help to Buy?
Let us, however, take a hypothetical but optimistic view here.
First-time buyers do manage to save this. They purchase the property, get the Government top-up so the loan-to-value is at 77.5%, move in, have smaller mortgage repayments because they have borrowed less, and all seems to be going smoothly.
But hang on… haven’t we been here before?
In the not-too-long-ago past, an almost identical scheme was in place that offered 5% deposits, then topped this up with a further Government 20%, meaning a 75% mortgage was taken on the property.
Known as the Help to Buy scheme, again only on new-build properties, it carried the same message of helping first-time buyers get onto the property ladder. While take-up of the scheme was high, under the surface was confusion, a lack of understanding and perhaps a lack of clarity as to how repayments would actually work.
What happened when Help to Buy repayments began?
The loan was interest-free for the first five years and then, in year six, interest started to be paid.
The caveat here was that the amount owed back was linked to 20% of the house value at that time and not simply what was originally borrowed. While this could arguably work both ways, with less owed if property prices fell, rising house prices meant many homeowners ultimately had more to repay.
The other consideration was that homeowners were then faced with either paying monthly interest back to the Government or repaying part of the loan in a lump sum. More often than not, the latter was either not possible or meant many individuals borrowed extra money on their mortgage to pay back the Government.
With the sharp rise in interest rates into 2022 and beyond, taking out additional money was not always a feasible option, leaving many owners stuck with a mortgage and having to pay the Government a monthly fee.
Many criticised the scheme for almost running an interest-only loan alongside a capital-and-interest mortgage simultaneously.
Now, admittedly, the interest is low and, as an example, on a £350,000-valued home, estimated payments from year six onwards would be around £110–£120 a month on current figures. However, this is still an additional cost that homeowners then have to face on top of their mortgage.
Mortgage repayments remain the bigger challenge
It is worth noting that, while there is a huge fluctuation in mortgage rates based on lender and different criteria, a typical figure of around 4.5% interest on a 75% loan-to-value mortgage is fairly common.
Even at £250,000 of borrowing, and ignoring the Government equity loan for a moment, that is still repayments of close to £1,300 a month if looking at a 30-year term.
This then comes back to the initial concern that has been outlined from the start: many are simply not in a position to pay that type of money each month and then also have to consider another repayment in five years’ time on top of already high mortgage repayments.
Of course, any help to get more people on the property ladder is appreciated and the Government’s intentions are good, but ultimately the proposal starts to look flawed when it is dug into further.
Like with the Help to Buy scheme, while it certainly had its successes, there were many who were left confused and did not fully understand the actual terms they were getting themselves into when applying for the scheme.
Was it a lack of knowledge and understanding, or was it that the scheme was never fully transparent and clear to begin with?
Why should support be limited to new-build homes?
One of the key issues is: why should the scheme only apply to new builds?
As already outlined, new builds are vastly more expensive than second-hand homes and, straight away, even with a 2.5% deposit requirement, raising over £8,000 compared with potentially needing around half of that on a second-hand home does not assist many who are already struggling to save.
While there have been some good-news stories behind the old Help to Buy scheme, others have been highly critical and ask whether we really need another such scheme, or whether the whole system needs to be rethought.
Is Help to Buy version 2 really the answer for first-time buyers?
Should the scheme be extended to second-hand homes for first-time buyers instead of just new builds? Should there be better transparency over how the scheme will work?
Is this just Help to Buy version 2, or will there be different plans in place when it comes to repayments?
Do we instead need to focus on how mortgage rates can start to become more affordable to begin with, and how individuals can get assistance with saving and being able to apply for mortgages in the first place?
Many individuals paying £1,000 a month in rent and unable to save struggle to understand why lenders will not take this into account. They may be able to show months and even years of statements demonstrating reliable payments to a landlord, for example, which shows affordability for a mortgage.
Should Government intervention here instead focus on mortgage lenders’ eligibility criteria and less strict rules around saving requirements, as well as giving first-time buyers the chance to explore other homes rather than creating an exceptionally limited system that only allows them help if buying a new home?
Even with the assistance, new homes are often out of reach, have unaffordable mortgage repayments and still require a good chunk of savings, even if only at 2.5%.
While the intentions at the heart of the plan are good, the system still fails to address the fundamental problem facing first-time buyers: not simply getting a foot on the property ladder, but being able to afford to stay there.
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BSc (Hons) Real Estate Management – University of the Built Environment
