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Virgin Introduces a Five-Year Fixed Mortgage with a Two-Year Early Repayment Charge

Journalist: Riz Malik

ended 26. January 2024

Virgin Money has announced the launch of their new Fix and Switch Mortgage and boasts ‘ you won’t find a five-year fixed, with a two-year ERC, from any other provider’. The add:-

Fix and Switch is a five-year fixed rate mortgage with a difference – its ERC only lasts until the end of year two. After that, there’s no ERC. This means your customers get five-year protection against rates going up, but if they go down, they can switch to another deal after two years (which is where you come back in).

We've launched residential purchase products exclusively for Intermediaries:

• NEW 85% LTV Fix and Switch 5 Year Fixed Rate fee-saver at 5.14% with £500 cashback.
• NEW 90% LTV Fix and Switch 5 Year Fixed Rate fee-saver at 5.27% with £500 cashback. 

And if that’s not enough, our affordability assessment for Fix and Switch is based on a 5 year deal. 
 

Will this help your clients? Should Virgin be commended for it's innovative approach? Do you think it will be popular? Share your thoughts on this breaking story.

23 responses from the Newspage community

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Riz Malik
Independent Financial Adviser at R3 Wealth
Virgin's strategy is intelligent and precisely what the market requires as it fills the gap for clients who may want to hedge any increases but take advantage of future cuts and are prepared to pay a premium for that.

It's crucial for lenders to strive for innovation and not just compete on interest rates. This approach should serve as a benchmark for other lenders, likely prompting their product development teams to put in extra effort to keep pace.
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Akhil Mair
Director at Our Mortgage Broker
In a market where flexibility and transparency are increasingly valued, Virgin Money's Fix and Switch mortgage emerges as a beacon of progress. It's a testament to Virgin Money's dedication to empowering homeowners and reshaping the mortgage landscape for the better.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
It's great to see more innovation like this. There'll undoubtedly be cases where this kind of product could work really well for borrowers given the flexibility it offers, alongside some security against rate rises.
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Rohit Kohli
Director at The Mortgage Stop
Great to see a lender try new things and this product will certainly be of interest to many borrowers who want security but not be tied in with eye-watering penalties to switch to lower rates. Very impressed with Virgin for bringing this out.
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Justin Moy
Managing Director at EHF Mortgages
Clever product design from Virgin Money, providing both long-term stability and a way of changing the deal part way through without penalty, ideal if rates have moved a long way during that time. The most important aspect of this is the extended affordability that lenders can apply to longer-term products, giving significantly more borrowing capacity to those moving home. A win-win-win product.
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Jack Tutton
Director at SJ Mortgages
Another lender trying to simulate the market with an initive new product which is competivley priced. I feel that this could be attractive to potential purchasers by giving them long term assurances in their payments with the ability to review it after 2 years without penalty. It is interesting to note thought that this is only available currently at higher loan to values for purchases only, Virgin are clearly trying to assist this sector of the market.
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Simon Bridgland
Director at Charwin Private Clients
A master stroke by Virgin, almost giving the best of both worlds. I can see this being picked up by quite a few clients given the uncertainty with rates. The only negative is that the rate is a little high compared to the best 5 year deals and 2 year deals, thats said its a hell of a safety net for those wanting to hedge their bets. I wonder if the competition will follow suit with their own similar offering, the appetite is there for innovation like this.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
This is a great product innovation offering borrowers both some long term rate security with the added flexibility of being able to review after 2 years should that be beneficial. This added flexibility will of course come with some rate cost but may be a fantastic option for those caught deciding between 2 and 5 year fixed options.
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Elliott Culley
Director at Switch Mortgage Finance
This will be a good option for borrowers looking for the security of a 5 year fixed rate, whilst keeping their options open after two years in case rates have reduced. This product is more expensive than other 5 year fixed products and even some 2 year fixed products offered by other lenders, but the premium is understandable considering the flexibilty of the product. It will be interesting to see if this product becomes popular with borrowers over the coming months. It will certainly attract more risk adverse clients with the flexibilty.
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Premium
Jamie Alexander
Mortgage Director at Alexander Southwell Mortgages
This product stands as an excellent choice for individuals with a suitable financial profile, particularly when assessing affordability over a five-year period. Introducing variants with lower loan-to-value ratios would be great. For those navigating the decision between the stability afforded by a 5-year fixed rate and the reservations associated with committing to an extended agreement, Virgin Money has introduced a highly viable solution. The implementation of this strategies by virgin is commendable.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
Virgin money are letting borrowers have their cake and eat it. 5 year fixed rate with only 2 years early repayment charges, meaning you can swap after 2 years if you choose. Yes please.
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Gareth Davies
Director at South Coast Mortgage Services
Excellent product for the right people, especially when affordability is based on a 5yr basis. Get some at lower LTVs too and really mix it up.
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Rowan Frayling
Managing Director at J Finance
Virgin should be praised for bringing some product innovation into the market rather than just rate wars! This is an interesting option for the right client and something that should grab attention!
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
For those borrowers who are struggling to decide between the security of taking a 5-year fixed rate but concerned at the thought of being tied into a deal for that length of time, Virgin Money have now delivered the perfect solution. It's also great to see this sort of innovative thinking from lenders, as it shows that they are competing with each other, and that interest rate and overall cost is no longer the only battleground.
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Lee Gathercole
Co-Founder at Rebus Financial Services
Hats off to Virgin Money, this is just the kind of innovation we need. This will help those nervous first-time buyers & homeowners who are hesitant to tie in for 5 years but also are struggling to get the borrowing they need to get onto the property ladder or move home.
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Graham Cox
Director at Bridging Hub
This eye-catching move from Virgin shows the innovation required to compete in today's market. Especially for lenders who aren't topping the cheapest rates table. It's likely other lenders will follow suit in short order. Forget price wars, the new normal is early repayment charge wars.
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Richard Jennings CeMAP
Founder & Managing Director at Richard Jennings Mortgage Services
Whats not to love about this product! the launch of this product offering from Virgin really does hit a huge segment of the market. With many clients looking at higher rates they are tempted by the often cheaper deals at 5 years, but don't like the sting that if rates fall they will be stuck paying more. Often its a which is the lesser of two evils, pay more now but review sooner or obtain the cheaper deal now but be stuck with it for 5 years. Virgins innovate approach in the 5 year fix market will I am sure be in huge demand. I just hope their service levels and product offering are around for more than a few days so clients can actually benefit from this.
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Ben Tadd
Director at Lucra Mortgages
These new exclusive products should gain a fair bit of traction, as they provide the perfect level of security for the next 5 years, with a huge amount of added flexibility. Borrowers who elect to apply for these products will have the perfect storm, having the ability to take advantage of much anticipated improved market conditions and more competitive rates after the initial 2 years, assuming the market improves, whilst still being able to sleep easy at night knowing their rate is fixed for the next 5 years. It will be interesting to see how many lenders potentially folow suit with similar offerings over the next few weeks.
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Amit Patel
Adviser at Trinity Finance
Game Changer!

A bold, innovative move by Virgin Money. This will be of benefit to borrowers who want surety of a long term fix but have the flexibility to switch in 2 years without having to incur a penalty. Virgin more deserve all the plaudits, it will be interesting to see if other lenders bring out a similar proposition.
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Gary Bush
Financial Adviser at MortgageShop.com
More groundbreaking initiatives from another UK High Street lender with this announcement from Virgin - a 5-year fix that can be renegotiated in years time, should rates fall, will really help struggling and confused consumers. Well done UK financial companies for keeping the mortgage competition war raging into 2024.
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Robert Timm
Managing Director at Sunland Mortgages
This is a really interesting concept. We've seen in the past where lenders will do a switch and fix option, but that means staying with the same lender. If I am understanding the concept correctly, this means the client could sell, or remortgage, after 2 years without incurring an Early Repayment Charge. This affords clients and brokers greater flexibility and can only be seen as a positive.
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Hannah Bashford
Director at Model Financial Solutions
This is a great inititive and will give some borrowers the 'best of both worlds'- security that they may want from a long term fixed, but the flexibility to remortgage without penalty if rates reduce.
Affordblility is also a key issue so having this based on the 5yr lending levels will help more people to get the lending they need but allow them to re-assess in the short-term.
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Steven Morris
Advising Director at Advantage Financial Solutions
Whilst this is nothing innovative as Coventry have been doing this for years, it is timely, unique (no one else is doing it currently, Coventry included) and in tune with the customer needs of the day. Much like a miniature version of Perenna's pricing, this should be seen as a 2 year fix, with an extra 3 years thrown in for free. When viewed this way, it is amongst the absolute cheapest 2 year fixes on the market, but allows the customer to borrow more because of the 5 year fix stress rates. Coupled with Virgin's 20%-30% affordability increase across mutliple lending scenarios since the beginning of the year, and also combined with other criteria leaps forward since Andy Cooke took the wheel of the national account manager role, Virgin Money may finally be a real force to be reckoned with in intermediary mortgages. Now if only they could sort out the VMO system...