"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."
- Craig Calder, head of secured lending at Virgin Money
Virgin Money and Halifax are offering reduced mortgage rates for new build customers, teaming up with Own New to launch its new ‘Rate Reducer’ product, available from Monday 26th February.
By investing homebuilder incentive budgets into the mortgage upfront, typically up to 5% of the property purchase price, initial repayments will be reduced for buyers.
For a new home worth £300,000, for example, the introductory two-year mortgage rate of 4.79% with a £995 fee at 65% LTV will be cut to 0.99% at 60% LTV with a £495 fee.
The Own New Rate Reducer offers new build customers the security of a reduced fixed rate over two or five years and is available initially for selected developments by Barratt Homes.
Lenders Gen H, Furness Building Society and Perenna have also confirmed they will soon be offering mortgages through the scheme.
The product uses the completion incentive budget offered by the housebuilder to enable lenders to provide a lower interest rate mortgage, reducing the monthly repayments for the initial fixed rate period, while ensuring the customer is paying off more of the capital value of their home.
The Own New Rate Reducer is expanding in scope from 4th March, with customers able to select their new home from one of the 60 housebuilders taking part in the scheme, including Persimmon, Taylor Wimpey, Bellway and Berkeley Homes.
The Rate Reducer follows on from the launch of Virgin Money’s Fix and Switch product which allows customers the security and certainty of an interest rate fixed for five years, but with the flexibility of being able to switch to another product with no early repayment charge after just two years.
Own New was launched in 2022 and its Deposit Drop product has been helping buyers in the North East and Yorkshire to buy a new home with a five per cent deposit since early 2023.
Eliot Darcy, founder of Own New, 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. People can benefit from Rate Reducer whether they have a small or large deposit. For some people who already have equity in their home, it could herald the return of the sub-one per cent mortgage deal.
“We are delighted to be joined by Halifax and Virgin Money for the launch. By working together, we are increasing mortgage lending opportunities and bringing the possibility of owning a new-build home to wider range of buyers.
“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 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.”
Amanda Bryden, head of Halifax Intermediaries, added: “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.”
