Own New has launched a brand new ‘Rate Reducer’ product, in a bid to offer reduced mortgage rates for new-build customers.
For some buyers with a high deposit or equity, rates below 1% will be available.
It will offer more power to consumers over their monthly outgoings, which in turn will give many more people the confidence to make their first or next home move.
Rate Reducer will launch with Halifax, Virgin Money and Barratt Developments on Monday 26 February. Other housebuilders across the country will join from Monday 4 March.
Lenders Gen H, Furness Building Society and Perenna have also confirmed they will soon be offering mortgages through the scheme.
Own New Rate Reducer works by using incentive budgets which housebuilders offer to their customers to reduce their monthly mortgage payments over a fixed term.
For example, if the housebuilder offers a 5% incentive on a home, Own New Rate Reducer takes this sum and directly offsets it against the mortgage interest to reduce monthly payments.
Buyers can opt to spread the benefit across the first 2- or 5-years, depending on their lender’s criteria.
In addition to cutting monthly outgoings during that time, the customer will pay more off the capital value of their mortgage because the interest charged on the loan is lower.
Lenders will still carry out their usual affordability assessment, to check that the purchaser can afford repayments if the interest rate increases once the fixed-term benefit ends.
Also, independent financial advice must be sought from a regulated mortgage broker who has completed additional training to access this scheme.
Barratt Developments worked alongside Own New to design Rate Reducer and will be the first housebuilder to launch the scheme. Other developers who have supported and are signed up to take part include Persimmon, Taylor Wimpey, Bellway and Berkeley Homes.
Eliot Darcy, founder of Own New, said: “Our ethos is to make home ownership open to more people and we are confident that the launch of the Own New Rate Reducer will achieve that.
“We, and the national lenders and housebuilders who have signed up to the scheme, believe that Rate Reducer will be a significant boost to many people’s home buying dreams.
“By working together, we are increasing mortgage lending opportunities and bringing the possibility of owning a new-build home to a wider range of buyers.
“This is just the product to stimulate the housing market and give more people a helping hand to get onto the property ladder or to secure that new home that will give them the extra space they need.”
Craig Calder, head of secured lending at Virgin Money, said: “We’re delighted to be a founding lender of the innovative Own New Rate Reducer, making it easier and more accessible for customers to afford a new-build home.
“Buying a home is a major life event and this first-of-its-kind mortgage product will help customers feel happier about their big purchase, knowing that they have the certainty of a lower fixed interest rate over the initial period of the mortgage.
“By using the homebuilder incentive budget to offset initial mortgage repayments, buyers can focus on other costs like furnishings and decoration, to make their house a home.
“At Virgin Money we’re continually looking at new and inventive ways in which we can assist borrowers, with the Rate Reducer following hot on the heels of our recent Fix and Switch product, which also provides certainty and flexibility.”
Further reaction:
Amanda Bryden, head of Halifax Intermediaries, said: “We know that buying a new home is a big commitment for our customers so we’re thrilled to be one of the first lenders to offer the Rate Reducer incentive through participating builders.
“This product gives customers more choice in the way they can benefit from builder incentives and is especially helpful to those who want to see a lower initial mortgage payment as they get set up in their new home.
“Supporting homeownership remains a key priority for us, and the valued advice of mortgage brokers will help borrowers understand which is the right option for them to achieve their homeownership goals.”
Steve Mariner, sales and marketing director at Barratt Development:
“By launching the Own New Rate Reducer scheme we are helping more people to be able to afford a home.
“The scheme gives buyers the financial boost they need to get them onto the property ladder.
“They will be able to compare all the options available to them to make sure they get a mortgage product that is right for them and in their long term financial interests.”
David Hollingworth, associate director at L&C Mortgages:
“Buyers will no doubt have paused their plans due to higher mortgage rates pushing up their monthly payments.
“This product looks to address those concerns by using the developer’s incentive to slash the rate on the mortgage.
“This will help target one of the key barriers for many and give buyers more breathing space in their monthly payments.
“Borrowers will have to meet lender affordability tests as normal but it will also be important for them to plan ahead.
“Once the deal ends there is every chance that the rate environment will still be higher and so payments will climb.
“However, buyers will know this on the way in and therefore be able to work toward making provision for an increase in payments in the future.
“In the meantime, they will feel they have more flex to enable them to buy sooner.
“We’ve seen other schemes that can help buyers with small deposits but this new, innovative approach puts another option on the table for buyers.”
Nicholas Mendes, head of marketing at John Charcol:
“Innovation continues to drive our sector and make homeownership possible.
“Purchasing a home is a significant life milestone, and Rate Reducer allows buyers the more power to consumers over their monthly outgoings, lower fixed interest rate during the initial phase of their mortgage, and more importantly confidence to embark on their journey to home ownership or moving.
“Supporting homeownership remains priority for lenders, and brokers and thrilled to see such a product on the market.”
Terry Higgins, group managing director new build mortgage services for The New Homes Group:
“Since the demise of Help to Buy, the market has been crying out for a scheme to help get people onto the property ladder.
“The Rate Reducer enters the market at a good time, our enquiries have been significantly up so far this year and we are seeing buyer levels increasing, however, with the cost of living remaining high and interest rates that feel higher than we’ve become accustomed to for the last decade, the monthly cost can be off putting.
“Buying a new build property can have real financial benefits in terms of energy efficiency, repairs guarantees and warranties, but beyond that developers are in unique a position to offer monetary incentives such as cashback deals or reduced interest rates from lenders.
“These incentives can make a huge impact on buyers pockets and the Own New Rate Reducer means mortgage applicants will benefit from a truly subsidised mortgage.
“This product keeps the conventional mortgage, but directs the housebuilder incentive straight to the lender, lowering the initial interest rate.”
