Following the launch of Own New on Friday, which will make lower rate mortgages available on some new homes, Newspage asked a selection of brokers for their views.
Some were positive about the scheme, saying that they “can see this helping a lot of people get on the ladder,” while others were less impressed, with one broker saying: “This has disaster written all over it.”
In response to broker scepticism, Eliot Darcy, CEO at Own New, said: “We are pleased that the industry has broadly welcomed this innovative approach to helping buyers and boosting the new homes industry.
“Its potential impact has been likened to Help to Buy. Own New Rate Reducer has been designed to prevent future affordability issues for customers, with stringent stress testing in place.
“Specially trained brokers guide them through the process and it is impossible to access this scheme without proof that the higher payment level is within affordability levels.
“The scheme is open to all brokers in the country. To ensure the very best customer outcomes on launch, we have a training program for brokers and it is important that the broker works closely with customers and homebuilders in the new build space today.”
He added: “Since Help to Buy ended, there have been calls for more Government support for the new homes market.
“Own New Rate Reducer seeks to answer this need through private sector funding, rather than relying on public money.”
Reaction:
Stephen Perkins, managing director at Yellow Brick Mortgages:
“The cheese is placed in the mousetrap with this scheme.
“Big headlines and posters proclaiming ‘own this home from as little as X pounds a month’ based on the largest deposit and discounts will no doubt generate interest and purchases from buyers who would be paying more per month for a secondhand property.
“However, this is a dangerous scheme in that buyers will get used to the lower payments and when that initial product ends they will be faced with a large increase in their payments.
“The slightly quicker reduction of the capital balance will unlikely put them in a lower loan-to-value banding to offset that increase.
“Ultimately, though, like the Help to Buy scheme that preceded it, this scheme will see developers just increasing their house prices leaving the potential buyers no better off at all, whilst also sacrificing the other incentives they would have been able to secure.
“This may be the best option for some buyers, but need to ensure they are fully aware of the risks.”
Matthew Jackson, director at Mint FS:
“This is without doubt a headline that will grab the attention of buyers across the country. But the devil is in the detail.
“Why would lenders and developers sign up to such a scheme? Is it to benefit buyers or themselves? I suspect it is the latter, with the removal of Help to Buy lenders have a huge hole in mortgage lending and developers are struggling for sales.
“Without a doubt developers will use these affordable mortgages to increase house prices, meaning a premium will be paid for own new stock, and the payment shock at the end of the product will be enormous.
“Will the buyer be advised correctly? Doubtful, with the self-selected panel of brokers being the normal new homes brokers who are locked at the hip with developers and never work for the buyer. This has disaster written all over it.”
Ranald Mitchell, director at Charwin Private Clients:
“The newly introduced Own New scheme will quickly become the talk of the town, capturing the attention of both first-time buyers and seasoned home-movers alike.
“Designed to stimulate sales of new homes, the scheme aims to offer attractive mortgages to potential buyers.
“It’s a strategic move by house builders, who have been searching for innovative ways to invigorate their stock movement amidst challenging market conditions.
“Prospective buyers are advised to proceed with caution. New build property tends to be inflated in price, and its essential to negotiate the price down where you can.
“Learning from the Help to Buy scheme, Own New buyers would also be wise to enter this scheme basing their ability to pay on open market rates, rather than the market dazzlers being presented to them.
“Own New will present exciting opportunities for some, but buyers need to make well informed decisions before entering into these transactions.”
Justin Moy, managing director at EHF Mortgages:
“This looks to be a great headline generator for the new build developers, and will have a natural appeal to those looking to buy.
“This has a feel of a rehashed Help to Buy scheme, an upfront incentive with benefits but may be deferring financial issues for another day.
“This doesn’t allow anyone to borrow more, just a discounted rate to start with, using an incentive budget on mortgage costs rather than having stamp duty paid or cheaper prices.”
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions:
“On the surface, the Own New deal may dazzle buyers, such as first-time buyers, with its seemingly lower payments.
“Yet the glaring question remains: are they genuinely saving compared to purchasing a traditional, non-new build property with current rates?
“Typically, new-builds command a hefty premium. Moreover, post the honeymoon phase of these fixed rates, are these buyers braced for the impending surge in mortgage payments as standard normal fixed rates take effect?
“This is a crucial detail that demands transparency and buyers should be made aware of.”
Gary Bush, financial adviser at MortgageShop.com:
“Caution is all we have to say on the subject of further government meddling in the UK property market, with a large number of their previous attempts Help to Buy having applicants now locked out of the remortgage market and looking down the barrel of the gun marked negative equity.
“It beggars’ belief why the UK is still suckling on the large Plc building companies, who seem to be the only people who will be benefitting from this fiddling with the numbers.
“It’s clear until we have an effective low-cost housing alternative on offer or a bolstering of the existing excellent shared ownership scheme new-build property prices will only be stretched further away from reality.”
Graham Cox, founder at Self Employed Mortgage Hub:
“Another demand-side scheme designed solely with the intention of boosting lender and house builder profits by propping up house prices.
“Imagine the rate shock when in two years’ time the borrower’s mortgage payment has nearly doubled.
“Supply-side measures are what’s really needed. Good quality social housing at scale, planning permission reform, clamping down on developer land banking, and including property in the 2% inflation target.
“All of these would help reduce house prices and make them truly affordable without the need for ‘incentives’ like this and a 40-year mortgage term.”
Elliott Benson, owner at Sett Mortgages:
“Being involved heavily in the first-time buyer market, I can see this helping a lot of people get on the ladder, as the main factor that affects a decision is the monthly payment and budget as opposed to anything else.”
Akhil Mair, director at Our Mortgage Broker:
“This is welcome news. Own New announces a groundbreaking mortgage product featuring rates below 1%.
“This initiative aims to enhance affordability and accessibility for prospective homeowners, particularly those with substantial deposits or equity.
“The move has garnered widespread acclaim, promising greater financial flexibility and empowering individuals to pursue their homeownership dreams.
“Anticipation is high as Own New reshapes the landscape of mortgage lending, setting a new standard for affordability and innovation in the industry.
“Let’s hope the new hype lives up to its intentions.”
Elliott Culley, director at Switch Mortgage Finance:
“The Own New scheme certainly has the opportunity to be a disruptor in the current market. New-build needed a shot in the arm and this scheme looks set to provide it.
“This could mean higher prices for new builds and borrowers should take this into consideration when buying.
“Borrowers will also need to be made aware of potential higher monthly payments once they come off the scheme.
“If buying at a lower overall value, this scheme will have a smaller difference on monthly payment so borrowers must consider this when the examples promoting the scheme are on high borrowing amounts.”
Simon Bridgland, broker and director at Release Freedom:
“This is super innovation, which is greatly needed from the mortgage and housebuilding sectors.
“It will definitely receive some well-deserved headlines as it stands out proud from the far more risky and rumoured 1% deposit scheme.
“Although the two schemes would service a different buyer generally, it will certainly help to stimulate movement in the wider market, which will then trickle down to the first-time buyer.
“For the naysayers, I would suspect that it has been priced into the property valuation, just as any developer discount would have been, so I guess it really depends how you want the incentive to be offered, a cheaper purchase price which will also help on stamp duty or the lower initial payments. The choice is yours, I guess.
“I would relish the chance to offer such a scheme, but will it be offered en masse for the broker market? Probably not”
“Harps Garcha, director at Brooklyns Financial:
“A new initiative from developers offers relief for first-time buyers and house movers amidst rising mortgage payments. Buyers should tread cautiously.
“While these new homes may seem enticing, they often come with a premium price.
“Opting for a non-new house could mean lower monthly payments due to the lower value of similar properties.
“Once the initial fixed-rate period ends, mortgage holders may face affordability challenges, mirroring the recent trend of rising mortgage payments.
“Even with a larger reduction in the mortgage balance, the premium paid initially could negate any significant savings.
“Buyers must consider potential hurdles like lack of equity and remortgaging complexities, akin to issues seen with Help To Buy.
“In light of these factors, while this initiative offers a glimmer of hope for buyers, it’s essential to weigh the potential risks and benefits carefully before diving in.”
Rohit Kohli, director at The Mortgage Stop:
“The introduction of the Own New Rate Reducer scheme, while seemingly a boon with its lower mortgage rates for new-build homes, could be a Trojan Horse in reality, offering what appears to be a gift but one that may carry hidden consequences.
“The scheme’s design may lead to inflated home prices as developers look to recoup the costs associated with the scheme.
“Additionally, the limitation of mortgage advice to a select group of intermediaries, potentially aligned more closely with developer and lender interests, raises questions about the impartiality of the advice given to buyers.
“As the initial favourable mortgage term ends, homeowners could face significant rate increases, a prospect that necessitates careful consideration of the long-term financial impact.
“Buyers are encouraged to conduct thorough due diligence to ensure that the scheme’s short-term rewards do not lead to long-term financial strain.
“As the saying goes, “never look a gift horse in the mouth”.”
Bob Singh, founder at Chess Mortgages:
“The first of the schemes designed to kick start the new build sector is here. Own New.
“As I read the details and analyse the scheme I can’t help wondering how many intermediaries were consulted.
“It seems once again little thought has gone into the product design and, by making it available on inflated new builds only, and mortgages through their chums, I can’t say I’m going to recommend them to my clients. Sorry.
“In a period of declining interest rates offering 40-year cost comparisons and discounts translated into lower rates doesn’t appeal when rates will fall regardless.
“I wonder how many properties will be downvalued by their own pet surveyors? Probably none.
“Now let’s see what’s the 1% deposit scheme can do to trump Own New. With Own New, it seems the risk is on you.”
