Mortgages with interest under 1% - a new era in home financing?

Own New in the UK has launched a mortgage product that will enable borrowers to take out a loan with an interest rate under 1% for those buying new builds - is this the new era of home financing, and will it catch on in Europe?

The Own New Rate Reducer product launched with Halifax, Virgin Money, and Barratt Developments today - 26 February - along with other housebuilders across the country joining from 4 March.

'It could unlock lower mortgage rates and reduce your monthly payments, whether you're a first time buyer or an existing homeowner," Barratt Homes said on its website.

How does the Own New Rate Reducer work?

Dependent on the build stage of your chosen home, Barratt Homes said it could contribute either 3% or 5% of the purchase price towards your move.

The contribution goes directly to your mortgage lender (through the 3rd party Own New), which could subsequently reduce your mortgage interest rate by up to 3.19%.

Own New founder, Elliot Darcy, told the Financial Times: "Our ethos is to make home ownership and mortgage lending in this country open to more people and we are confident that the launch of the Own New Rate Reducer will achieve that.

"Alongside the national lenders and housebuilders who have signed up to the scheme, we believe that Rate Reducer will be a significant boost to many people's home-buying dreams."

Darcy also highlighted to the FT that "this is just the product" to stimulate the housing market and to give more people a "helping hand and initial boost" to get onto the property ladder.

However, many experts have criticised the new product, including Matthew Jackson, director at mortgage advisers Mint FS, who told Sky News: "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. This has disaster written all over it."