Virgin Money will offer reduced mortgage rates for new-build customers, teaming up with Own New as a launch partner for its Rate Reducer product, available from Monday 26 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 – making home ownership more accessible and affordable.
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 proposition of the Own New Rate Reducer offers new build customers the security of a reduced fixed rate over two or five years and is available exclusively via specialist new build intermediaries registered with Virgin Money – initially for selected developments by leading homebuilder Barratt Homes.
The product uses the completion incentive budget offered by the housebuilder to enable Virgin Money 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.
Most homebuilders will also require customers to pay a deposit in advance to secure their new home.
To access the Own New Rate Reducer as it expands in scope from 4 March, customers will be 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. Applicants will then be referred to one of a network of specialist new build mortgage broker partners.
Virgin Money head of secured lending Craig Calder commented: “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”.
Nick Mendes at John Charcol said: “Innovation continues to drive our sector and make homeownership possible. Rate Reducer the latest incentive is a dedication to the builders and lenders who have signed up to the scheme”.
He added: “Purchasing a home is a significant life milestone, and this mortgage product allows buyers the more power to consumers over their monthly outgoings, lower fixed interest rate during the initial phase of their mortgage, and more importantly confidence to embark on their journey to home ownership or moving”.
Associate director at L&C Mortgages David Hollingworth, takes a similarly positive stance:
“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”.
He concludes: “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.”
