Mortgage rates have been a hot topic in the UK lately, with many lenders slashing their interest rates to make homeownership more affordable. However, these rate cuts have largely benefited those with large deposits, leaving those with smaller deposits struggling to get a good deal.
That’s why Virgin Money’s latest move is big news. The lender has just launched a five-year mortgage fix at a rate of 3.99% for those taking out 75% loan-to-value (LTV) deals. This means that borrowers only need a deposit of 25% to qualify for the deal.
But what does this mean for the average homeowner? To put it simply, it means that those with smaller deposits can now access more competitive mortgage rates. This is especially important for first-time buyers who may not have a large deposit saved up.
According to Nick Mendes of John Charcol brokers, Virgin Money’s move could trigger a chain reaction among other lenders. “When lenders feel secure about the economic landscape, they can price their mortgages more competitively, as we’re seeing now,” he said.
Aaron Strutt of Trinity Financial agrees. “The lenders are really focusing on five-year fixes at the moment and the cheapest rates are for borrowers with 35% or 40% to put towards their property purchase. It is good news Virgin Money is targeting borrowers with a slightly smaller deposit,” he said.
So, what’s driving this trend? One factor is the recent cut in the Bank of England’s base rate. This has led to a decrease in swap rates, which are used to price fixed-rate mortgages. As a result, lenders are now able to offer more competitive rates to borrowers.
However, it’s worth noting that mortgage rates are still higher than they were in 2020 and 2021, when interest rates were below 1%. This means that those coming off fixed-rate deals now may still face higher monthly payments, even with the latest rate cuts.
Despite this, the latest news from Virgin Money is a positive sign for the mortgage market. With lenders competing for business, we can expect to see even more competitive rates in the coming months.
In the meantime, what can borrowers do to take advantage of the current market? Here are a few tips:
- Shop around: With so many lenders offering competitive rates, it’s essential to shop around and compare deals.
- Consider a fixed-rate mortgage: Fixed-rate mortgages can provide peace of mind and protect against future rate rises.
- Look for lenders that offer deals for borrowers with smaller deposits: Virgin Money’s latest move is a great example of this.
Overall, the latest news from Virgin Money is a welcome boost for the mortgage market. With rates set to fall even further, now is the perfect time for borrowers to take advantage of the current market and find a deal that suits their needs.
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Caption: Mortgage rates are falling, but what does this mean for borrowers?
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