Virgin Money launches 2-year fix at 5.09% with 1% fee

Virgin Money has today announced a new set of fixed rate deals, including a 2-year fixed rate remortgage product at 5.09% up to 60% LTV, with a 1% fee (see bottom for full product range).

Remortgage Exclusives:

• NEW 60% LTV 2 Year Fixed Rate will be launched at 5.09%.
• NEW 70% LTV 2 Year Fixed Rate will be launched at 5.15%.

Brokers said the percentage fee on the 2-year fixed rate is arguably more interesting than the rate itself, with one stating Virgin Money has taken "a leaf out of Skipton's book”. 

According to Ranald Mitchell, director at Norwich-based Charwin Private Clients: "It's good to see more rate reductions but it is the introduction of percentage fees rather than flat product fees that grabs the attention. Whether these will benefit any particular case is entirely dependent on that set of circumstances, but there will be benefits to some. It seems like the offsetting of mortgage interest to fees is becoming more of a thing in the mortgage space."

Justin Moy, managing director at Chelmsford-based EHF Mortgages, said that percentage fees could be the trigger to breach the 5% barrier on two-year fixes: “More rate reductions can only be good news for borrowers, as market competition is the main reason why rates continue to edge downwards. There is a very interesting 2-year fixed rate deal at 5.09% with a 1% fee, and this may be the quickest way we will see sub-5% short-term deals in the coming months. The take-up numbers will be interesting. Either way, more product innovation from lenders can only be encouraged.”

Elliott Culley, director at Switch Mortgage Finance, also welcomed the move: "Virgin is trying something different here whilst taking a leaf out of Skipton's book of charging a percentage. Once again, this is a lender trying to find ways of attracting more business while rates are a little stagnant. From a broker's perspective, it's good to have options for customers and everyone's situation is slightly different."

But Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, sounded a note of caution: “Whilst it is great to see 2-year fixed rates edge ever closer to the sub-5% zone, the 1% product fee on a 2-year deal will likely not be cost-effective for most borrowers. However, low rates will no doubt attract some borrowers as Virgin is fighting hard for some market share to hit its year-end lending figures.”

Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management, stressed the importance of advice with such products: “Rate reductions are always a move in the right direction, even with a 1% fee. The fee won’t work for everyone, but this is where having qualified advice prevails, as borrowers can assess all the options that are available to them and make an informed decision based on their circumstances and requirements.”

Steven Hargreaves, mortgage and protection adviser at The Mortgage Co, said the new products from Virgin are yet more proof of the fixed rate war that is currently raging: “The headline rates are very good, and yet more evidence that the fixed rate war is continuing. When advising on products you would always show a client the difference between a lower rate with high product fees and a higher rate with no product fees. That said to see these rates compared to what we were discussing with clients a couple of months ago is fantastic.”

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