Help to Buy equity loan applicants have been advised to plan ahead as to how they will repay the loan.

Castle Trust senior adviser Matthew Wyles spoke to Mortgage Solutions, and said that because there was a lack of proper regulation, borrowers had to plan accordingly to ensure they were in control of their finances.

He explained that if the loan was a true equity loan with no repayments over 25 years, it would be realistic to view house price inflation as your mortgage exit. 

However, he pointed out that interest must be paid after five years as part of the government scheme, and then the rate will increase sharply in the subsequent years.

Mr Wyles said: “The fact they took the equity loan scheme out of mortgage regulation was a particularly extraordinary decision. Just because it was decided by the government does not mean it shouldn’t be subject to regulatory scrutiny.”

The government’s mortgage scheme involves a five per cent deposit and a 20 per cent government equity loan. It has been credited with rejuvenating the housing market, although critics are warning that it could create a housing bubble.