The figures above assumes CPI is constant at 2% and no reduction in the loan amount.
From the table, your first interest payment will be 1.75% of the amount you borrowed.
Your interest will go up each year in April by the CPI, plus 2%. This is worked out by multiplying the loan amount (purchase price x equity loan percentage). The equity loan percentage will reduce if any part repayments are made.
The interest rate increases every year by adding CPI plus 2%. The interest rate from the previous year is then used to work out the interest rate rise for the following year.
For example, the following shows how any interest rate increase is calculated assuming CPI remains constant at 2% and no payments are made to pay off the government loan:
1.75% (the rate in year 6) + 0.07% (1.75% x (0.02 CPI + 0.02) = 1.82%
1.83% (the rate in year 7) + 0.07% (1.83% x (0.02 CPI + 0.02) = 1.90%