Own New, a property finance company, launched a ‘Rate Reducer scheme’ earlier this year. Designed to help homebuyers obtain lower interest rates when purchasing a new-build property, some may be eligible for a rate of less than 1%.
Eligibility criteria
You may qualify for the scheme if you’re buying a new build property, whether you are a first-time buyer or home mover, employed or self-employed. You’ll be assessed based on your current earnings.
Whether you’re buying a house or flat, the developer must be signed up to the scheme. If you find a new build with a developer that isn’t, they’ll need to visit the Own New site to express their interest.
How the New Build Rate Reducer scheme works
Own New works with property developers and lenders to obtain reduced rates for homebuyers purchasing new builds.
Mortgages work in much the same way standard ones do, though they can only be accessed via Own New. Developers contribute 3% or 5% of the property price, which is sent to the corresponding lender. The sum is then offset against the interest, so the rate aligns with the developer’s contribution, meaning lower monthly payments to start.
Since its inception, the scheme’s partnering developers, lenders and advisers have increased. This continued growth means buyers are increasingly likely to find Rate Reducer properties.
There are a few lenders that offer mortgages through the scheme, including Halifax and Virgin Money. Developers include Barratt Developments and Bellway, amongst hundreds of others.
Financial benefits
The rates that can be secured on the scheme are considerably lower than rates obtainable on the conventional mortgage market. There are two major benefits lower rates offer – firstly, lower initial monthly payments and secondly, you can pay off more of the capital earlier in your mortgage term.
With rates starting at 0.99%, the benefits are clear. This is for a two-year fixed-rate mortgage with a loan to value (LTV) ratio of 60%. The rates are higher for those with a higher LTV, i.e. those who’ve borrowed a higher percentage against their home.
Either way, the savings are impressive when compared against regular mortgage rates. Rightmove confirms that the average two-year fixed rate for buyers with a 40% deposit is 4.38%.
Based on this, a £200,000, 25-year mortgage could see you save around £8,000 over a two-year period. Though, not everyone can qualify for the 0.99% rate.
