How does the Own New Scheme work?

When you purchase an eligible new-build property, the developer contributes a percentage of the property’s purchase price, typically between 3% and 5%.

Instead of receiving this contribution as cash or as a reduction in the purchase price, it is paid to the participating mortgage lender. The lender uses this contribution to subsidise the interest rate on your mortgage during the initial fixed-rate period, allowing you to benefit from lower monthly repayments than you might otherwise receive through a standard mortgage.

The length of the reduced-rate period will depend on the mortgage product you choose, although many participating products offer either a two-year or five-year fixed rate.

Once the fixed-rate period comes to an end, the mortgage works much like any other residential mortgage. Unless you arrange a new mortgage product, you’ll usually move onto your lender’s Standard Variable Rate (SVR), which may result in higher monthly payments depending on interest rates at that time.

For this reason, many homeowners review their mortgage options before the end of their fixed-rate period to see whether switching to a new deal could be appropriate.

Own New Rate Reducer or Own New Flex?

There are currently two main versions of the Own New Scheme, each designed to provide a slightly different balance between reducing mortgage costs and accessing other incentives.

The Own New Rate Reducer option uses as much of the developer’s available contribution as possible to achieve the lowest mortgage rate available through the scheme. For buyers whose priority is reducing their monthly mortgage payments during the fixed-rate period, this is often the main attraction.

Own New Flex takes a different approach. Instead of using the entire developer contribution to reduce the mortgage rate, part of the incentive may be available for other benefits offered by the developer. Depending on the development, this could include contributions towards Stamp Duty, legal fees, flooring packages or other purchasing incentives.

The options available will vary between developers and individual plots, so it’s worth understanding exactly what’s being offered before making a decision.

Who can use the Own New Scheme?

The Own New Scheme is available to many first-time buyers and home movers purchasing eligible new-build properties. Unlike some home ownership initiatives, it isn’t restricted solely to first-time buyers.
To qualify, the property must be on a participating development, the housebuilder must be offering the Own New Scheme and you’ll need to arrange your mortgage through one of the participating lenders.
As with any mortgage application, you’ll still need to satisfy the lender’s affordability checks, credit assessment and lending criteria. Being eligible for the scheme itself doesn’t automatically guarantee you’ll be approved for a mortgage.

What is a standard 95% mortgage?

A 95% mortgage is one of the most common ways for buyers with a smaller deposit to purchase a property.

With this type of mortgage, you contribute a minimum 5% deposit and the lender provides the remaining 95% of the property’s purchase price. This is why they’re often referred to as 95% Loan-to-Value (LTV) mortgages.

For example, if you’re buying a home costing £250,000, you would usually need a deposit of £12,500 and borrow the remaining £237,500 through your mortgage.

Unlike the Own New Scheme, a standard 95% mortgage is generally available on a much wider range of properties. Depending on the lender, this can include existing homes as well as some new-build properties, giving buyers considerably more choice.

How do mortgage rates compare?

One of the biggest differences between these two options is how the mortgage rate is achieved.

With a standard 95% mortgage, the interest rate is determined by the lender’s normal pricing for borrowers with a 5% deposit. Because the lender is providing a higher proportion of the property’s value, rates at this loan-to-value can sometimes be higher than those available to buyers with larger deposits.

With the Own New Rate Reducer Scheme, the developer’s financial contribution allows participating lenders to offer a lower initial fixed rate than may otherwise be available on a comparable mortgage. This can result in noticeably lower monthly repayments during the fixed-rate period.

However, it’s important to remember that the reduced rate is only available for the agreed introductory period. Future mortgage rates cannot be guaranteed, so it’s sensible to consider how affordable the mortgage could be once the initial deal comes to an end.

What happens when the fixed rate ends?

Whether you choose the Own New Scheme or a standard 95% mortgage, your fixed-rate deal won’t last forever.

Once your initial deal expires, you’ll normally move onto your lender’s Standard Variable Rate unless you’ve arranged a new mortgage product beforehand. Standard Variable Rates are set by individual lenders and can change over time.

Many borrowers choose to remortgage before this happens, allowing them to secure another fixed-rate or tracker mortgage, subject to affordability checks and the products available at that time.

Planning ahead can help avoid unexpected increases in monthly repayments and gives you the opportunity to compare the mortgage market before your current deal finishes.