Own New Rate Reducer scheme explained

The new Own New Rate Reducer scheme offers buyers access to rock bottom mortgage rates. But what’s the catch? We take a look...

Rebecca Gamble Consumer Journalist

What is the Own New Rate Reducer scheme?

Own New Rate Reducer is a scheme designed to make it easier and cheaper to buy a new build home.

Property finance company Own New works with lenders including Halifax and Virgin Money and more than 60 home builders including Barratt Homes, Bellway, Persimmon and Cala, to allow home buyers access to rock-bottom mortgage rates during their mortgage’s initial term.

For example, in Autumn 2024, Virgin Money offers a 2 year fixed rate Rate Reducer mortgage at 0.35% if you have a 5% builder incentive (max LTV 60%, scheme fees £995 +£250 cashback.) By comparison, in October 2024, the best mortgage rate on a 2 year fix was from Coventry Building Society at 3.89%. (Scheme fees: £999, Max LTV 65%, Purchases only).

KEY INFORMATION

Own New Rate Reducer scheme: At a glance

The Own New Rate Reducer scheme is designed to make it easier and cheaper to buy a new build home. Here’s how it works and what you need to weigh up…

• Own New Rate Reducer is a new scheme available on new build homes that uses a developer’s incentive to reduce how much you pay on your mortgage each month for the first few years.
• You could access substantially lower mortgage rates by using the Rate Reducer scheme than if you buy on the open market with a traditional mortgage – some rates are sub 1%.
• You can buy through the Rate Reducer scheme with a deposit as little as 5%
• But there are downsides to Own New Rate Reducer such as you’ll have limited choice of property and lender, rates could rocket once your initial deal ends and you could risk overpaying for your house.

How does the Own New Rate Reducer scheme work?

House builders often offer incentives to encourage you to buy a new home, from paying your stamp duty bill to upgrading fixtures and fittings. And the Rate Reducer scheme works by using a developer incentive in the form of a contribution to slash the buyer’s mortgage rates over the first few years.

When you choose your property, the developer will agree to contribute 3% or 5% of the purchase price. This contribution goes to your mortgage lender, via Own New, and the lender will offset the contribution against the mortgage interest to reduce your monthly payments for the first 2 or 5 years, depending on the length of your initial term.

To buy a home through Own New Rate Reducer you’ll need to speak to an approved mortgage broker. Speak to our partners at fee-free mortgage brokers L&C today to find out more.

How much will I pay with the Own New scheme?

Own New Rate Reducer scheme mortgage rates are lower than you’ll find on the open market.

For example, as we explain above, Virgin Money offers a 2 year fixed deal at an eye-catching 0.35% if you have a 5% builder incentive. But this rate is only available if you have a 40%+ deposit.

If you have a smaller deposit, rates are less attractive. But they’re still better than you’d get on the open market.

For example, if you’ve got a 25% deposit and you’re taking out a £200,000 mortgage, Virgin Money offers an Own New Rate Reducer scheme mortgage at 1.14% (max LTV 75%, scheme fees £995). This would mean monthly mortgage payments of £766 for the first two years.

By comparison, the average mortgage rate on a 2 year fix at 75% LTV in October 2024 is 4.66%, according to Rightmove. If you borrowed £200,000 at this rate, you would pay £1,130 each month for the first two years. Over two years, by opting to use the Own New Rate Reducer mortgage scheme could save £8,736 on mortgage payments (assuming the arrangement fee is the same).

But bear in mind that if you’re using the scheme, the incentive is going to the lender to reduce the your mortgage payments. If you negotiated the same incentive as money off your purchase, you may pay a higher amount on your mortgage payments but your mortgage would be smaller.

See our mortgage cost calculator to work out the cost of your mortgage or to compare mortgage deals.

How long are lower mortgage rates fixed for?

Your mortgage rate will be fixed for 2 or 5 years, depending on which mortgage product you take out when using the Own New scheme.

What happens once the fixed term ends?

Once your fixed deal ends, you’ll either need to remortgage onto a new deal or you’ll roll onto the lender’s standard variable rate. You’ll likely see your mortgage rate jump significantly once you move off this scheme.

Who is eligible to use the Own New Rate Reducer scheme?

The Own New Rate Reducer scheme is open to anyone buying a new build property, whether you’re a:

• first time buyer
• home mover
• or you’ve owned property in the past

Which mortgage lenders can I use with the Own New Rate Reducer scheme?

Own New Rate Reducer launched with Halifax and Virgin Money. However, Leek Building Society, Darlington Building Society and Furness Building Society are among lenders that now offer mortgages through the scheme.

To buy a home through Own New Rate Reducer you’ll need to speak to an approved mortgage broker. Speak to our partners at fee-free mortgage brokers L&C today to find out more.

Pros and cons of the Own New Rate Reducer scheme

If you’re considering the Own New scheme it’s important to weigh up the pros and cons.

The pros of the Own New Rate Reducer scheme:

• Lower monthly mortgage payments: The biggest advantage of the Own New scheme is that you’ll be able to access lower mortgage rates compared to the open market.
• You’ll pay off more capital: A knock on effect of paying a lower interest rate is that you’ll pay off more capital borrowed.

Cons of the Own New Rate Reducer scheme:

• You might not get the headline rates: Virgin Money’s example of sub 1% mortgage rates has attracted many headlines but that rate is available at 60% LTV i.e. you having a 40% deposit. Plus you’ll need a 5% developer contribution.
• Limited choice: You’ll have less choice of properties as you’ll need to buy from a developer that’s signed up to the Own New scheme and you may also be limited to selected plots.
• Make sure you don’t overpay for your house: The Rate Reducer scheme works by a developer offering an incentive of 3% or 5% of the property’s value which is put towards your mortgage. If you choose to take advantage of an incentive scheme it can put you on the back foot when it comes to negotiating the best price for your new build property. See our guide on How to negotiate the price of a new build home.
• Be prepared that rates could rocket: Once your initial period is over (the 2 or 5 years) you will pay standard mortgage rates. So your repayments could shoot up. If you take out a 2 year mortgage, you may feel this comes around very quickly.
• New build premium: When you buy any new build house or flat, it will depreciate in price the minute you turn the key in the door. Even in a rising property market, you may not get your money back when you buy a new build home if you have to sell within a year or two. Find out more in our guide Top tips for buying a new build house.

Which developers have signed up to Own New?

Barratt Developments worked alongside Own New to design Rate Reducer and was the first housebuilder to launch the scheme. However, many developers are signed up to take part include Persimmon, Taylor Wimpey, Bellway and Berkeley Homes.

How do I apply for Own New?

If you want to buy a property through the Own New scheme here’s the process:

1. Find a property: You’ll need to find an eligible new build property from a developer signed up to the scheme – read on for more on this.
2. Arrange your mortgage: Your next step is to discuss your mortgage options with an approved Own New mortgage broker, such as our partner fee-free mortgage brokers L&C.
3. You’ll continue the new build buying process in the normal way. And unlike with the shared ownership scheme, once you’ve completed, you’ll own 100% of your new home.

The process of buying a new build is slightly different to buying an older property. Find out more in our guide New build conveyancing explained and research what buying a new build involves including buying off-plan and the common pitfalls and problems in Top Tips to Buying A New Build.

Own New Rate Reducer – the expert view

David Hollingworth, Associate Director at L&C Mortgages says, “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.”

Want to find out more about Own New Rate Reducer mortgages? To talk through your options, get in touch with our fee-free mortgage brokers at L&C.

What are the alternatives to Own New ?

Own New Rate Reducer isn’t the only scheme that can help you buy a house. Alternatives you may want to investigate include:

• 95% mortgages: The Mortgage Guarantee scheme, which runs until 2025, was introduced to help increase the supply of 5% deposit mortgages by supporting lenders to offer these products through a government-backed guarantee. This scheme doesn’t limit you to new build houses so you’ll have more choice of properties. However, the scheme isn’t something you specifically apply for and it’s worth noting that many lenders don’t rely on the scheme for their 95% deals. Find out more in our guide on The Mortgage Guarantee Scheme 2021-2025.
• Shared Ownership: But there are pros cons to this complicated scheme, so we’d always recommend doing your research and buying on the open market if you can.
• The First Homes Scheme: This is where you may be able buy a home for 30% to 50% less than its market value when you meet certain criteria (although qualifying properties are very scarce).
• Deposit Unlock: This was developed by the House Builders Federation to help first time buyers and home movers buy a new build home with just a 5% deposit. Again, a 95% mortgage on the open market would be preferable to this scheme which limits you to a new build.
• 100% mortgages. In 2023 Skipton Building Society launched the 100% LTV Track Record Mortgage, designed to help first time buyers and those who haven’t owned a property in the UK in the last 3 years to take out a no deposit mortgage, provided they have a minimum 12 month proven track record of paying rent. In 2024 the lender extended the scheme to people buying shared ownership properties. For more details, see 100% mortgages – should I get one?

Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

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