Own New has introduced a mortgage product with rates below one per cent for those buying new builds.
The mortgage product, Own New Rate Reducer, will "give many more people the confidence to make their first or next home move".
It launches with Halifax, Virgin Money, and Barratt Developments today (February 26) with other housebuilders across the country joining from March 4.
Lenders Gen H, Furness Building Society, and Perenna have also confirmed they will soon be offering mortgages through the scheme.
Own New founder, Elliot Darcy, said: “Our ethos is to make home ownership and mortgage lending in this country open to more people and we are confident that the launch of the Own New Rate Reducer will achieve that.
“Alongside the national lenders and housebuilders who have signed up to the scheme, we believe that Rate Reducer will be a significant boost to many people’s home-buying dreams.”
Darcy added that “this is just the product” to stimulate the housing market and to give more people a “helping hand and initial boost” to get onto the property ladder.
Own New said the Rate Reducer works by using incentive budgets which housebuilders offer to their customers to reduce their monthly mortgage payments over a fixed term.
As an example, Own New stated that, if the housebuilder offers a 5 per cent incentive on a home, 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 two or five 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.
Additionally, independent financial advice must be sought from a regulated mortgage broker who has completed additional training to access this scheme.
Virgin Money head of secured lending, Craig Calder, said: “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.
“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 incentive ways in which we can assist borrowers, with Rate Reducer following hot on the heels of our recent Fix and Switch product, which also provides certainty and flexibility.”
tom.dunstan@ft.com
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