Own New has unveiled a mortgage scheme that harks back to the near-record low rates of Autumn 2021. But there’s a catch – these dreamy rates are exclusive to new-build home buyers. Dubbed the “Rate Reducer” scheme, this innovative offer promises to make homeownership more accessible and affordable, especially for those willing to invest in a new property.

What’s on Offer?

The Rate Reducer scheme is not just any mortgage deal; it’s a potentially game-changing approach for those eyeing a brand-new home. Collaborating with heavyweight mortgage lenders like Halifax and Virgin Money, as well as leading developer Barratt Developments, Own New is offering jaw-dropping rates as low as 0.99 percent. To put this into perspective, the average mortgage rate on the open market hovers above 5 percent, making the Rate Reducer’s offering exceptionally appealing.

How Does It Work?

This scheme is designed to ease the financial burden of buying a home. Similar to how some housebuilders might offer to cover your stamp duty or provide a direct discount on the purchase price, the Rate Reducer scheme aims to reduce your monthly mortgage payments for a fixed term of two or five years. This is achieved by applying a housebuilder’s incentive directly to the mortgage interest, thereby lowering the monthly dues.

For those dreaming big, securing the lowest rate requires a hefty deposit. For example, snagging the coveted 0.99 percent rate for a £300,000 new-build would necessitate a 40 percent down payment. But the rewards are tangible, translating to significant monthly savings and more of your payment going towards the capital, not just the interest.

The Catch

However, as with all great deals, there’s a catch. The scheme currently partners with a limited number of lenders and developers, though expansion is on the horizon. Moreover, to bag the biggest discounts, you’ll need to have a substantial deposit ready.

A Glimpse into Savings

Let’s break down the numbers. Opting for a £300,000 new-build through this scheme, with a 40 percent deposit, you’d be looking at monthly payments of £677 over two years at the 0.99 percent rate, a stark contrast to the £1,000 or more you’d fork out on a typical 4.5 percent rate. Over two years, this equates to a saving of £7,752, or about 2.6 percent off the purchase price. Not only do you save monthly, but you also chip away more at the capital, enhancing your equity stake early on.

Who’s Joining the Party?

The Rate Reducer scheme isn’t flying solo; it’s backed by heavyweight housebuilders like Persimmon, Taylor Wimpey, Bellway, and Berkeley Homes. With such names on board, the scheme’s reach and appeal are bound to grow, offering more buyers a shot at these enticing rates.

Lenders on Board

Initially, the scheme rolls out with Halifax and Virgin Money, with Gen H, Furness Building Society, and Perenna poised to join the fray. Despite the attractive rates, lenders will conduct their usual affordability checks to ensure buyers can manage repayments once the honeymoon period ends.

Is It Too Good to Be True?

Critics and proponents alike have voiced their opinions on the Rate Reducer scheme. Some herald it as a financial lifeline for buyers in tough times, enabling them to afford a home when they might otherwise struggle. Others, however, see it as a slick move by developers to maintain high prices in a fluctuating market, urging buyers to tread carefully and consider negotiating a direct discount on the purchase price for immediate savings.

The Verdict

The Rate Reducer mortgage scheme presents an alluring opportunity for those looking to buy a new build, offering significant savings on interest rates and monthly payments. However, it’s not without its considerations, such as the need for a large deposit and the potential for higher rates down the line. Prospective buyers are advised to weigh their options, consider the long-term implications, and seek independent financial advice to ensure the best deal for their circumstances.

As the scheme rolls out, it’s clear that Own New is setting the stage for a more accessible and financially appealing pathway to homeownership. But as with any major financial decision, the key lies in careful consideration and planning for the future.