What is own new rate reducer?

What is the Own New Rate Reducer?

Own New Rate Reducer is a private scheme (not a government one) that helps people buy new build homes with a lower mortgage interest rate.

The housebuilder contributes money (usually around 3%–5% of the purchase price) and this goes straight to the lender. The lender then uses that contribution to lower your interest rate which leads to lower monthly mortgage payments.

You can use this contribution to reduce your rate just for the first 2–5 years (meaning even lower payments in the short term).

Who can use the Own New Rate Reducer scheme?

This scheme is available to lots of buyers, not just first time buyers.

You can apply if you are:

• A first-time buyer, or
• An existing homeowner

To qualify, you need to:

• Be buying a new build home from a developer that offers the scheme
• Use a participating mortgage lender
• Be applying for a standard mortgage (not Shared Ownership or Help to Buy)
• Use the home as your main residence (not as Buy to Let)

An L&C mortgage adviser can help you decide if the Own New Rate Reducer is the best scheme for your circumstances.

How does the Own New  Rate Reducer scheme actually work?

Let’s say you’re buying a new build home for £300,000.

1. The developer agrees to contribute 5% of the price (£15,000). That money goes to the lender through the scheme, and in return:
2. Your mortgage interest rate is lowered, often by between 0.5% to 2%
3. Your monthly payments are reduced, potentially by hundreds of pounds per month
4. The scheme runs in the background so you don’t have to apply separately or fill in extra forms
5. You still need to qualify for the mortgage as normal, and you’ll still own 100% of the home.

What’s the difference between this and other schemes?

This scheme is not about reducing the price of the home or helping with your deposit. It’s purely about reducing your monthly mortgage payments by making the interest rate lower.

So, compared to other schemes:

How much can I save?

How much you save depends on:

• The value of the home
• The size of the developer’s contribution
• Which mortgage lender and deal you choose

Which developers offer it?

The scheme is fairly new but is being rolled out by many large developers across the UK, including:

• Barratt Homes
• Bellway
• Taylor Wimpey
• Persimmon
• Vistry Group
• Redrow
• Berkeley Homes
• Cala Homes
• Keepmoat
• Bloor Homes

You’ll need to check with the developer to see if the specific plot you’re interested in qualifies.

Which mortgage lenders take part?

At the moment, the scheme works with:

• Virgin Money
• Nationwide (coming soon)
• Some regional building societies (depending on location)

Not all lenders are involved yet, but more are expected to join. Your L&C mortgage adviser will be able to explain whose involved and get the best deal for your circumstance.

Are there any downsides to the Own New Rate Reducer?

Like any scheme, it’s not perfect for everyone.

• You need to buy a new build because the scheme doesn’t work with older homes
• You can’t combine it with Shared Ownership or First Homes
• Some critics say that builder incentives can inflate house prices, so always get a survey to check the true market value
• You’re still borrowing the full mortgage amount, so monthly savings won’t reduce your debt, just your repayments
• You may be tied in for a fixed rate period, with early repayment charges if you want to switch or move

How do I apply?

• Find a new build developer offering the Own New Rate Reducer
• Let them know you’re interested in using the scheme
• Speak to an L&C mortgage adviser
• Choose the mortgage deal that suits you
• The developer arranges the contribution, and the lender lowers your rate
• The scheme is handled in the background, it shouldn’t cause delays or extra paperwork.

Can I use the scheme with a Lifetime ISA?

Yes , if you’re a first-time buyer using a Lifetime ISA to boost your deposit, you can still use that alongside Own New Rate Reducer. The two don’t clash, since the scheme is about lowering your mortgage rate, not topping up your deposit.

Can I sell or remortgage later?

Yes, it’s your home, and you own 100% of it. You can:

• Sell the home whenever you like
• Remortgage once your fixed-rate deal ends
• Switch to a different lender later on

Just be aware that if you take a 2 or 5 year fixed rate, you may face early repayment charges if you want to leave before the deal ends, but that’s the same as with any standard mortgage.

The Own New Rate Reducer could be an option for you if you’re feeling squeezed by mortgage rates but don’t qualify for the First Homes scheme. It works especially well if you have a deposit saved up but are struggling with monthly affordability.