Thousands of people who took advantage of the government’s Help to Buy mortgage scheme could be facing expensive fees on their existing loans, as they near the end of their five-year interest free period.

The equity loan scheme allowed buyers to borrow up to 20 per cent of the value of a newly-built property, with a value of up to £600,000, from the government over a five-year term, with nought per cent interest, in a bid to get more people on to the property ladder.

However, once the five-year period is over, borrowers must pay a 1.75 per cent fee on the outstanding balance of their loan, which increases by 1 per cent each year due to RPI, unless the loan can be paid off, usually by remortgaging the property.

Many mortgage brokers and experts believe that this is going to cause “a very big problem” as few people are likely to have the equity in their home to remortgage.

“Many Help to Buy customers will have relied on rising house prices in order to supply this equity and remortgage. But a number of new-build homes may not have appreciated much over the last five years, and some may have been over-priced in the first place” said Property Industry Eye.

Riach Financial Services founder Rob Riach commented: “I told people to avoid these schemes, but those who did will struggle, especially where newbuilds have been overpriced."

Those who used the Help to Buy scheme in 2013 are estimated to have to pay an average of £652 of fees if they are located outside of London, whilst those in the capital will be facing fees of £927, according to Thinktank the Resolution Foundation, which also called the loans “a ticking timebomb”.

As a result of this, development firm Barratt is encouraging Help to Buy purchasers from 2013 to buy again following the same scheme, allowing them to “have another five years interest free".

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