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Pay 5% Deposit With The Own New Rate Reducer Scheme

Launched in February 2024, the Own New Rate Reducer scheme is designed to make purchasing a new build home more affordable. Through this scheme, buyers can secure a lower mortgage rate compared to traditional options on the open market.

How It Works

When you choose a new build property, the developer agrees to contribute either 3% or 5% of the purchase price as an incentive. This contribution, similar to other perks like discounted upgrades or stamp duty coverage, is directed to your mortgage lender via Own New.

As a result, your interest payments are reduced by the equivalent value for the first 2 to 5 years, depending on your mortgage term, resulting in lower monthly mortgage payments. The scheme is even available to those with a high deposit, of up to 40% which could produce an interest rate as low as 0.99% for an initial period.

Developer-Friendly Incentives

House builders have traditionally offered incentives or discounts to buyers to secure a sale. Own New has joined up with over 60 leading homebuilders, including Barratt Developments, Berkeley Group, and Persimmon Homes, to provide this alternative incentive option.

Available Lenders

The Own New Rate Reducer scheme launched with Halifax and Virgin Money, with other lenders expected to join soon.

Downsides?

A scheme that sounds almost too good to be true and helps thousands of young professionals and other first-time buyers to get onto the property ladder. We are expecting to see a lot more use of the scheme.

Buyers should consider some downsides:

• The scheme only applies to purchasing a new-build property from a developer approved by the scheme.
• If your equity in the property is low, difficulties could be encountered when the buyer comes to remortgage the property, especially if prices have not risen over the period.
• Buyers will have to budget for a potential jump in interest payments when the initial period ends.
• Often buyers of new builds are paying a premium price for having a brand new home, as such older properties may still remain more affordable.
• Only a limited number of lenders are currently partaking.

Eligibility

This scheme is open to anyone purchasing a new build property through a homebuilder approved by the scheme and not just first time buyers.

Get In Touch

Quastels’ real estate team brings extensive experience in handling new build purchases. We have collaborated with many of the home builders and mortgage brokers involved in the Own New Scheme.

Our team is qualified to guide you through the process of purchasing a new build property.

For financial information and eligibility, you must of course, contact your mortgage broker.

To discuss any of the points raised in this article, please contact  Gabrielle Barnaby or fill out the form below.

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Property Guide for Hong Kong Residents Relocating to the UK

For Hong Kongers looking to purchase residential properties in the UK, understanding the residential conveyancing process is essential. This article will provide an overview of residential conveyancing, offering insights into the legal procedures and considerations involved.

The UK legal system is recognised and trusted with a long established and transparent system of title records stored at the Land Registry. The Land Registry in England and Wales operates differently from Hong Kong as all Official Copies that prove ownership of properties, are stored electronically, and can be retrieved easily by solicitors acting in a property transaction. This differs from the system in Hong Kong, where the original title deeds are often held and passed to the new buyer upon completion.

The below is a simple explanation of the residential conveyancing process in UK:

1. Make an Offer

When you find a property you like, you make an offer to the seller/developer. You specify the price you’re willing to pay and any conditions you have. It is important to set out crucial terms at the outset. For example, do you have a particular timeframe you require for exchange and completion.

2. Acceptance of Offer

If the seller agrees to your offer, a memorandum of sale (for second-hand properties) or a reservation form (for new builds) will be issued detailing the terms and conditions for the purchase. It is important to check the details on the memorandum of sale/reservation form are correct. For example, is your full legal name used? Is the address provided your current residential address?

3. Appoint a Solicitor

You instruct a solicitor to handle the paperwork and legal aspects of the property purchase. In UK, the burden is on the buyer’s solicitor to establish the property has a good title. Quastels LLP is experienced acting for purchasers on developments across London and second-hand transactions. We can communicate in Cantonese to assist purchasers from Hong Kong understand the paperwork in their mother tongue language. We will assist you in a seamless transaction and provide a detailed legal report explaining important issues related to the purchase prior to exchange of contracts. Usually, a 10% exchange deposit is required upon exchange of contracts.

4. Surveys and Inspections

Unless you are buying a new build direct from a developer, no guarantee will be given as to the condition of the property. You should appoint a surveyor to prepare a report for you on its condition. In the UK, solicitors do not inspect the property or make any physical checks. This is the job of a surveyor.

5. Mortgage Arrangements

If you’re getting a mortgage, arrange this with a mortgage broker or a lender directly. For second hand transactions, you must consider the finance options prior to the offering stage. For off plan purchases, if you require a mortgage, we recommend you start the application at least 6 months prior to the estimated completion date, but of course you should not commit to an exchange of contracts unless you are certain you will have funds available at completion.

6. Exchange of Contracts

If you are satisfied with the legal report that you have received, the results of your survey , and that you will have funds available to complete the purchase, then you can ‘exchange contracts’. This is the point when you sign the contract and pay a 10% deposit, and fix the completion date. Once you have exchanged contracts both you and the Seller are ‘locked in’. Up to this point either you or the seller can withdraw from the transaction without penalty.

7. Completion

On the agreed-upon completion date, you pay the remaining balance of the purchase price. Any mortgage funds will be sent direct to your solicitor to use. The property’s legal ownership is transferred to you, and you receive the keys. Quastels LLP will deal with paying the SDLT and registering the property at Land Registry. For off plan properties, registration can take up to 12 months. The application to register the title at the Land Registry is protected until the Official Copies are received.

Below are answers to some common questions that purchasers from Hong Kong often ask during the conveyancing transaction:

Why do solicitors check source of funds in such detail for purchasing a residential property in UK?

The requirement for a source of funds and anti-money laundering (AML) checks in the UK for residential property purchases is primarily aimed at preventing illegal financial activities, such as money laundering and fraud. These checks are part of a broader effort to maintain the integrity of the financial system and property market. UK law firms are required to review the source of funds and origin of funds for the purchase of the property in UK to comply with AML regulations.

Quastels LLP provides a thorough Source of Funds Questionnaire to assist purchasers in providing the correct information. The following can be provided in readiness prior to starting the conveyancing process:

• Bank statements for the last three months
• Payslips/Employment contract/Business card
• Copy of your passport
• Copy of your proof of address within last three months (utility bill or bank statement)
• An explanation for the source of funds. How were the funds accumulated? For how long? Did you receive any gift of funds from a third party?
• Evidence for your source of funds. For example, have you sold/refinanced another property to raise funds for the purchase? Do you have stocks and shares portfolio? Do you receive bonus/commission from your workplace? Do you have rental income?

What Do I Need To Look Out For If I Am Purchasing A Property Through a Company?

There may be adverse tax consequences from holding the property through a company. At Quastels our tax department can guide you. In addition The Economic Crime (Transparency and Enforcement) Act 2022 creates an obligation on overseas entities to ensure information is provided as to the ownership of overseas companies holding property and that it be renewed on an annual basis.

Is It True That I Don’t Need To Pay Ground Rent On New Build Flats Anymore?

The Leasehold Reform (Ground Rent Act) 2022 prohibits ground rent being charged on new leases. Therefore, if you purchase a new property where a new lease is granted, no ground rent will be payable under the lease.

There are exceptions to the Act, including:

• Existing leases
• Leases granted pursuant to contracts exchanged before 30 June 2022
• Business leases

If you are interested in purchasing a residential property in the UK, please contact us and fill out the form below.

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The Big Housing Debate: What Are UK Parties Really Promising?

With a shortage of homes, intractable planning laws and an increasing population, the UK’s housing market is a point of contention for those looking to get on the housing ladder and those already on it. For voters this year, it is a big issue.

With that in mind, what are the main parties promising the electorate they are going to do if elected to form a government?

Labour

Starting off with the current favourites to win the general election, Labour have committed in their manifesto to –

• Build 1.5 million new homes, including a preference for housing that offers more affordable rental and ownership schemes.
• Give people who rent their home more rights and stop them being removed without good reason.
• Update the National Policy Planning Framework to restore mandatory housing targets, including for mayoral authorities, and strengthen the presumption of sustainable development for new residential planning applications, particularly on brownfield urban sites.
• Take a more strategic approach to greenbelt designation and release more land for homes to be built on. New development requirements will at the same time have to focus on benefitting communities and nature.
• Increase non-resident Stamp Duty Land Tax surcharge from 2% to 3% and use the income generated from that to fund additional planning officers for development implementation, including for the development of new towns.
• Make it easier for authorities to enforce compulsory land purchase, and reduce payouts to landowners, basing compensation on actual value rather than based on the prospect of planning permission.
• Make it more difficult and expensive to purchase social housing.
• Require developers to prioritise selling new homes to first-time buyers and locals rather than overseas buyers.
• Introduce a mortgage guarantee scheme to support first-time buyers.
• Ban new leasehold flats and promote commonhold as the default tenure, as well as “tackling unregulated and unaffordable ground rent charges.” It also talks about ending the “injustice of leasehold private housing estates and unfair maintenance costs”, as well as making it easier and cheaper for lease extensions and granting more rights to manage.

CONSERVATIVES

The current party in power has committed to the following if re-elected –

• Build 1.6 million new homes, creating more flexibility by abolishing planning laws previously enforced by the EU and prioritising building on brownfield land in urban areas, whilst protecting greenbelt land.
• Focus on raising density levels in inner London to those of European cities like Paris and Barcelona and focusing on regeneration sites in Euston, Old Oak Common and Thamesmead. Outside London the focus on redevelopment will be towards the cities of Leeds, Liverpool and York.
• Require councils to set land aside for local and smaller builders as well as enforcing less planning requirements on them.
• Require local authorities to use infrastructure levies paid to them by developers to improve the local areas, such as by delivering road improvements and GP surgeries to support the new homes.
• Renew the affordable homes programme so more people can get on the housing ladder and make permanent abolishing Stamp Duty for homes up to £425k for 1st time buyers. A new Help to Buy scheme will be introduced to provide up to 20% of the cost towards a new home, requiring buyers to only have a 5% deposit (funded in part by contributions from residential developers).
• introduce a “three strikes and you’re out” policy for anti-social behaviour from social housing tenants.
• Retain the number of current council tax bands, and see where cuts can be made to costs families are making.
• Retain the rule of people not paying Capital Gains Tax on their main home, retain rules permitting people to purchase their own social housing and retain current Stamp Duty levels.
• Provide a 2 year Capital Gains Tax relief to Landlords who sell their property to their existing tenants.
• Cap ground rents at £250 and phase in a reduction to a peppercorn (ie. zero pounds).
• Make it more difficult to end a lease through forfeiture of long leases and outlaw evictions of private tenants without good reason.
• Give councils the powers to limit holiday lets.

Liberal Democrats

The Lib Dem manifesto has promised to

• Build 380,000 new homes including 150,000 social homes a year through “new garden cities” and encouraing community-led development.
• Banno-fault evictions and make 3 years the default for tenancies, as well as creating a national register of licenced landlords.
• Give local authorities the right to end people’s ability to purchase their social housing.
• Permit local councils to purchase land at current value for redevelopment rather than inflated planning-added-value rates.
• Ensure new development has better flooding protections where relevant.
• Introduce‘use-it-or-lose-it’ planning permission for developers to encourage them to build, rather than sit on empty land.
• Introduce a rent to earn scheme whereby rental payments go towards ownership in the final equity of property.
• Make homes warmer and cheaper to heat with a ten-year emergency upgrade programme, and ensure that all new homes are zero-carbon.
• Remove dangerous cladding from all buildings, while ensuring that leaseholders do not have to pay a penny towards it.

Reform

The newest “big” party has committed to

• Fast track brownfield site development applications and provide more flexibility to developers who wish to undertake large residential developments.
• Require developers to prioritise local buyers.
• Enable landlords to deduct finance costs and mortgage interest from tax on rental income to encourage smaller landlords into the market.
• Incentivise new construction technology to speed up home building.
• Require potential leasehold or freehold charges to be made clear to new home purchasers.
• Reduce costs to extend leases and for leaseholders to buy their freehold.

Greens

The Greens have committed to

• Require local authorities to spread small developments across their areas.
• Require all new developments to be accompanied by the extra investment needed in local health, transport and other services.
• Ensure that all new homes include solar panels and heat pumps, where appropriate.
• Invest:
  • £29bn to insulate homes to an EPC B standard or above.
  • £4bn to insulate other buildings to a high standard
  • £9bn for low-carbon heating systems (e.g. heat pumps) for homes and other buildings
• Provide 150,000 new social homes and end the private right to buy scheme.
• Introduce rent controls for local authorities to manage.
• End no-fault evictions and introduce a tenants’ right to demand energy efficiency improvements.
• Create residential tenancy boards to provide an informal, cheap and speedy forum for resolving disputes before they reach a tribunal.

This article hasn’t touched on how realistic any of these policies actually are (some of them may strike you as particularly ambitious!). Their desirability will be decided by the Great British public on the 4 July!

To discuss any of the points raised in this article, please contact Josh Fraser, or fill in the below form.

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