Welcome to this month’s episode of the Mortgage Mum podcast with me, Charley O’Neill, Senior Mortgage and Protection Broker here at the Mortgage Mum.
This month’s episode is an exciting one, as we focus on an amazing new initiative to help people access lower interest rates when purchasing a new build property.
We’re going to be discussing Own New and a new product they have designed and brought to the market called Rate Reducer.
I’m joined today by none other than Eliot Darcy, CEO and founder of Own New, who’s going to give us the inside information. So if having a cheaper mortgage sounds like something you’d be interested in, then keep listening to find out more.
Meet Eliot…
Charley: Tell us about your background – you actually qualified as a chartered accountant, didn’t you? What made you think of Own New?
Eliot: That’s right. I started my career a long time ago now at PWC, trained there as a chartered accountant, and then moved from there into doing venture capital for about 11 years or so, working with young companies.
My job was to help them to grow, figure out new ideas and implement those in the company. That’s really where that learning came from. But you’re right, I had no prior experience other than being a user of mortgages.
That’s what started this. I was trying to buy a flat in London with my wife, and I didn’t have much of a deposit. I really struggled. A lucky friend of mine, whose parents gave him a deposit, found it easy. It didn’t really make sense to me. I considered myself to be a good borrower, but I just didn’t have that cash available. That’s where this all started.
We see it as a platform that solves problems for people in the mortgage market. The problems today are high costs of living, high interest rates, high inflation, high monthly costs. Our Rate Reducer looks to create cheaper mortgages for people.
How does Own New work?
Charley: I think it’s great. The problem then was the deposit, and a further problem now is higher interest rates. We’re really not used to them. I did a poll the other day, and the majority of people said they’re not buying a home at the moment. The reason isn’t saving a deposit or proving affordability, it’s those interest rates.
Can you explain how the Rate Reducer works? You spoke to lenders and builders to work it all out. What does it look like?
Eliot: From a client’s perspective, this is really simple. Own New Rate Reducer is just about enabling lower cost mortgages. It reduces people’s monthly costs, frees up cash and gives them a bit more breathing space.
It’s about creating cheaper mortgages. We can save people £100 a month on mortgage payments. They end up paying back a bit more capital on their mortgage, too, so there are two big benefits.
Own New is a platform with developers on one side and lenders on the other. Developers today offer incentives to people buying their properties. That can take different forms. It might be to help someone pay their stamp duty, or top up someone’s deposit as a deposit contribution.
Rate reducer is just a different way to use that incentive. We take the incentive and use it with the lender to create cheaper mortgages. For the customer, though, it’s just a normal mortgage in every way. The only difference is that the interest rate is lower and the monthly payments are cheaper, so you pay back a bit more capital than you otherwise would.
Keeping a mortgage affordable
Charley: I love the fact that it’s not just about how much someone can borrow. The lender’s affordability calculations aren’t changing. They’re based on the current rates on the market. It’s very different to an old starter mortgage where people have a cheaper rate initially and they have a huge shock after that period.
The lenders aren’t lending you more money so it’s perfectly affordable for you to have that mortgage at usual interest rates. When you get towards the end of your Own New rate reducer interest rate, which is currently a two year or a five year fixed rate, it should still be affordable like a normal mortgage would be. You just get the major advantage of cheaper mortgage payments during that initial period [podcast recording in April 2024].
It’s the best of both worlds from a client’s perspective. Affordability checks are still stressed at the normal rates, so people aren’t putting themselves at risk.
Eliot: That’s exactly it. You put it better than I could. This isn’t about pay less now, pay more later. Actually, you pay a little bit less later, because you’ve paid down more capital. It feels like a great solution for people in these times when costs are so high.
Charley: Absolutely. Some people might think they’d prefer 5% extra towards the deposit, but when you look at the savings and the interest rate, it’s so good. Most people are concerned about their monthly outgoings. That’s the top priority.
Convincing the industry
Charley: Obviously, from your perspective, you’re coming from outside the industry and dealing with people at the big banks. How have you found that? Did they understand the idea straight away, or has it been a journey?
Eliot: It’s definitely been a journey. Coming from outside the industry, you have to gain people’s trust and get to know people. With it being new and different, it takes time for that to become normal and seen as doable.
Also it’s a very heavily regulated environment, which it should be. Changing anything in that context is inevitably difficult. We’re very lucky to have launched with Halifax, Virgin Money, Furness and Perenna, which has just joined. Those guys have worked really hard on this to get this to market.
Our focus is absolutely on the customer, their problem and how we can solve that problem. The rest will come, because that’s what everyone cares about, ultimately – the banks, the developers and the brokers. The focus is, what’s the right solution for the customer?
Making a difference to parents
Eliot: New schemes are often aimed towards first-time buyers, but this is open to everybody. One client getting one of these mortgages at the moment was recently divorced and has to pay for two houses for the next year or so. It’s so great for him.
There’s another young couple who have just started to have to pay for nursery fees. They’ll have to do that for the next couple of years, so this is a good solution for them. It’s for anyone who wants a cheaper mortgage, but there are some specific circumstances where it works really well.
Charley: I love that. I hadn’t thought about the childcare perspective, and that is a huge temporary cost. It’s massive. If you can reduce your mortgage for that two-year period – and you can do five years as well – that’s a really great way to use it.
Obviously, at the Mortgage Mum, we have a lot of parents. Lots of people think, our rates are going to come down shortly, so I’m just going to do a two-year fix for now, but we’re not going to move. They’re putting off moving because of interest rates and planning to revisit in a couple of years.
But now, if they’ve got access to this and they’re open to purchasing a new build property, we can get to cheaper rates quicker – if that’s what they believe is going to happen in the future. Then we look at the market again once rates are more settled.
I’m sure by that point, if there’s a new problem on the market someone will come up with a new amazing idea to solve that problem as well. I’ll let you know when things start happening, and you can fix it!
Working with developers
Charley: You also deal with the builders and developers on the scheme. How was that journey? I bet they’re all super keen to get involved?
Eliot: Definitely. Again, it’s been a journey to build the relationships and get to know the individuals and the companies. But I think we’re in a good place now. I looked just before this call, and there are 291 developers on board already or in the onboarding process, which is great.
That’s all the big guys, Barrett, Persimmons, Taylor Wimpey, Berkeley Homes, Belway. And also, as you know, the smaller ones. There’s a good range of developers there.
Mortgages aren’t their thing, so if someone can solve that problem, great. Again, there’s a laser focus on their customer. If someone isn’t buying their properties because interest rates are high, but someone can solve that problem for their customers, then great.
An opportunity for smaller developers
Charley: There might be a developer down the road wanting to do this. It’s a great way to offer something different. I’m sure it will catch on and everyone might do it after a while, but it’s a great way to be able to offer cheap mortgages on your properties. With Help to Buy not around anymore, it can get those properties sold.
For a builder, you don’t need to have had a huge amount of experience and a development doesn’t necessarily need to have a huge number of properties. If any developers are listening, what does that look like from their perspective?
Eliot: There are no limits as far as we’re concerned. The lenders we’re working with want this to be open to anyone.
Obviously, we’re a proper company. We have to do the due diligence on developers but yes, large, small, medium-sized, all around the country. That’s all good for us. We want to be in a position where a customer wants to buy a new build wherever they want, they can do it through us.
The new build opportunity
Charley: That’s great, because smaller developers potentially have more niche properties or different techniques and features. My first property was a new build, and it was brilliant. Brand new, sparkling clean, didn’t have to worry about it.
You can add your own character to it as well. I did a podcast a few months ago with a lovely lady who’s a fanatic on interior design, who bought a new build property and added so much character.
But some people prefer not to buy new – they think that it’s just going to be this plain box. But with so many different types of builders there are more options. There are beautiful, bespoke properties being built.
Eliot: Yes, and actually, a really important point about buying new build properties is the energy efficiency. That’s a real key thing for us as well. Really energy-efficient houses mean cheaper monthly costs as well – and they are better for the environment, which is also really important.
What’s next?
Charley: What is the next thing for Own New? What are your plans for the next year or so?
Eliot: There are some obvious ones around getting more developers and more lenders on board to make it available to more customers. But really what we’re focused on is making sure that what we’ve got works as well as possible.
How do we get more people to understand that this is an option for them? That’s really key at the minute. It’s more about the customer. There are some customers who might be buying a Buy to Let, for example. Why shouldn’t they have access to this?
Some customers might do part exchange. Why shouldn’t they have access to this too? There are lots of customer needs that we’re going to hopefully move into fairly soon.
And then, after you tell me what the next problem is, we can work on that, too.
Find out if Own New could work for you
Charley: So people are aware, as of today on 10 April 2024, there are interest rates available through Own New for people who are putting as low as a 5% deposit towards a new build property, so it’s not just for those with a large deposit.
The interest rate reductions available through the scheme by using your incentive to access a rate reducer interest rate, are currently up to 4% when making a direct comparison to what’s available when you’re not using the scheme. So, these are not small reductions, there are large savings there to be made on interest during your initial rate period, if you do choose to use this scheme.
It’s really good. Everyone I’ve spoken to has just been really excited about it.
To find more information see the Own New website. It explains how this all works, with information on all the brokers and builders that are part of the scheme as well.
If you’re interested in learning more about Own New to see if it could work for you, you need to speak to an approved broker. There’s a list on the website.
They can go through it with you and see if this is the best solution for you or if a different solution might work. Find out just how much this scheme could save you in your monthly payments on a new build property. If you’d like more information, please get in touch.
Eliot, it’s been an absolute pleasure to have you here today. Thank you so much for joining us.
