Virgin cuts rates

Virgin is making some pretty large price cuts, which is a very welcome change from some of the chunky rate hikes it has made recently. NatWest is launching a two-year fix at 4.49% and a five-year fix at 4.67%, just undercutting Santander’s new rates, which have gone live today. It is hard to predict exactly what will happen in the mortgage market over the short term due to the ongoing fluctuating funding costs. Thankfully there are more lenders offering two-year fixes below 4.5% now and five-year fixes priced at 4.70% or slightly lower. The good news is that rates are reasonably priced again in general and the anticipated pricing hikes have not happened yet. HSBC is topping the mortgage best buy tables at the moment.

These cuts are welcome, but borrowers should not assume they are guaranteed to last. Mortgage pricing is not only about lender appetite; it is influenced by swap rates, gilt yields and expectations around inflation and the Bank of England base rate. If geopolitical tensions escalate and oil prices move higher, that can quickly feed back into inflation fears and make markets more nervous. That is where cuts become fragile.

I do not think borrowers should panic, but I also would not wait forever for a perfect rate. If a deal works for someone’s budget and circumstances, it may be sensible to secure it, particularly where the lender allows a product switch before completion if pricing improves. The market is moving in the right direction, but still sensitive to global shocks. Virgin, NatWest and Santander cutting rates is encouraging, but until inflation and geopolitical risks calm down, borrowers should see this as positive momentum rather than a guarantee cheaper deals keep coming.

Virgin's repricing is another welcome shove in the right direction, and the fact it's rippling out from NatWest and Santander suggests lenders are genuinely competing again rather than just trimming at the edges. Borrowers will feel the benefit, particularly on 2-year fixes where the cuts are sharpest.

The biggest killer of rate falls is uncertainty, and there's plenty of it about. How much of the current geopolitical backdrop is already priced in, and how much it will feed into oil and inflation, is anyone's guess. Markets seem to be assuming something will come along to steady things, but that's a fragile assumption and one bad headline could undo a chunk of this week's goodwill.

We've no reason to be anything other than cautiously optimistic that the current direction holds, but brokers should be reminding clients today's pricing isn't guaranteed to be here next week. If a deal stacks up, take it

Virgin joining the cutting club is genuinely good news, with two-year fixes down by up to 0.26% and the remo side getting some love too. Lenders are clearly competing again rather than nibbling at the edges, and borrowers on shorter fixes will feel the sharpest benefit.
That said, Trump calling Iran's response "totally unacceptable" overnight is exactly the sort of headline that rattles swap rates by lunchtime. Oil spikes feed inflation fears, and inflation fears feed pricing. If a deal suits your budget today, secure it and ask your broker about a product switch should rates fall further before completion. Cautious optimism, not complacency.