Help to Buy Management Fee From Year 6 — How the 1.75% Charge Works

Help to Buy Management Fee From Year 6 — How It Works

One of the most misunderstood aspects of the Help to Buy equity loan is the management fee that kicks in from year six. Many borrowers were focused on the "interest-free" nature of the loan in the early years and did not fully absorb the cost implications from year six onwards. This guide explains the fee structure clearly and helps you understand the long-term cost of holding your equity loan.

The Fee Is Not Interest — But It Behaves Like It

The monthly charge from year six is officially called a management fee, not interest. However, in practice it functions like interest — it is a recurring charge for holding the government's equity loan, and it does not reduce your loan balance. Every pound you pay in management fees goes to the government; it does not buy down the percentage of your home that the equity loan represents.

How the Fee Is Calculated

The management fee is calculated as follows:

**Year 6 annual fee = 1.75% × original equity loan amount**

The fee is based on your **original equity loan amount** (the cash figure when you completed your purchase), not on the current market value. This is different from the repayment calculation, which uses current market value.

**Example:** If your property cost £250,000 and you took a 20% equity loan, your original loan was £50,000. Your year-six annual management fee would be:

1.75% × £50,000 = **£875 per year**, or approximately **£72.92 per month**.

How the Fee Increases Each Year

From April of year seven onwards, and every April thereafter, the management fee increases. The increase is calculated as:

**Previous year's fee × (RPI + 1%)**

RPI (the Retail Prices Index) is an official UK inflation measure. It is typically higher than the more commonly cited CPI. If RPI runs at 3% in a given year, your fee for the following year increases by 4% (RPI 3% + 1%).

This compounding means the fee grows every year — and in periods of higher inflation, the increases can be substantial. During the high-inflation period of 2022–2023, RPI peaked above 14%, meaning some borrowers saw their management fees increase by over 15% in a single year.

A 10-Year Projection Example

Continuing the £50,000 loan example, assuming a steady RPI of 3% per year:

In reality, RPI fluctuates annually, so your actual fees will differ. The fee continues to rise indefinitely until you repay the loan in full.

Why Repaying Sooner Can Save Significant Money

Because the management fee never reduces your loan balance and compounds annually, the longer you hold the equity loan, the more you pay in total management fees while still owing the same percentage of your home. Repaying early — particularly before the fee escalates further — is worth modelling carefully.

Use our [Help to Buy calculator](/help-to-buy-calculator) to project your cumulative management fee costs over different time horizons and compare them against the cost of repaying the loan now versus later.

What Happens If You Miss a Payment?

If you fall behind on management fees, Target HCA will contact you. Persistent non-payment can constitute a breach of your equity loan agreement and, in serious cases, could allow the government to take steps to recover the debt. If you are struggling, contact Target HCA proactively — there may be options available to you.

Key Points

• The management fee starts in year six at 1.75% of your original equity loan amount
• It rises every April by RPI plus 1 percentage point
• It is based on the original loan amount, not current market value
• It does not reduce your loan balance — it is purely a holding cost
• The longer you hold the loan, the more you pay cumulatively