Virgin launches best-buy mortgage rate in seven-day ‘fire sale’

• Lender offers cheapest remortgage rate – but only for a limited time
• Broker says it could be pulled even earlier due to high demand 
• Mortgage rates have fallen due to lower inflation and base rate pause 

Virgin Money will launch a best-buy remortgage rate tomorrow, as lenders continue to cut the costs of home loans – but borrowers will have only seven days to secure it.

The bank is offering a rate of 4.9 per cent on a five-year fix, in what is being termed a ‘temporary rates fire sale’. 

It charges a fee of £995, and is only available to new remortgage customers switching from a different lender, who have a deposit or equity of at least 40 per cent. 

The rate is the lowest on the market for remortgagers, and is a reduction of 0.25 percentage points on the product’s previous price. 

The next-cheapest deal is Yorkshire Building Society’s 4.92 per cent, also on a five-year fix. It charges a higher fee of £1,495, but is available to those with a deposit of 25 per cent or above. 

It comes as lenders have continued to cut mortgage rates at pace this week, with several more high street names bringing out deals below the 5 per cent mark.

One mortgage broker said borrowers should expect ‘more competitive offerings’ in the coming months, as more settled financial markets had given lenders ‘confidence’ about how loans should be priced.  

> Work out how much a mortgage would cost you each month using our tool 

Virgin is also reducing its five-year fix for those with a 70 per cent deposit or equity  by 0.25 per cent to 4.95 per cent, again with a £995 fee. 

Nicholas Mendes, mortgage technical manager at broker John Charcol, said: ‘It’s been a while since we’ve seen a temporary rates fire sale. 

‘This latest rate from Virgin at 4.9 per cent on a five-year fix will put it as a market leading remortgage rate’

‘Mortgage holders have seven days to secure the rates before they are pulled from the market, and suspect if Virgin receives more applicants than anticipated this could be cut shorter.

‘Trying to second guess when the market is going to bottom out is virtually impossible, and having a broker in your corner will help navigate continuous lender repricing.’

Also this week, TSB has launched a five-year fixed mortgage with an interest rate of 4.89 per cent. 

Like most of the cheapest deals on the market, it is only available to those buying a home, and they must have a 40 per cent deposit. The deal has a fee of £995.

This is not quite as cheap as Virgin Money’s similar five-year purchase deal, at 4.82 per cent, but that has a bigger fee at £1,295 and is only available via mortgage brokers. 

Nationwide has also announced a raft of rate cuts from today. Its lowest-rate fixed deal is now 4.94 per cent on a five-year fix, for new borrowers purchasing with a 40 per cent deposit, which comes with a £999 fee. 

According to the financial information service Moneyfacts, the average five-year fix across all deposit sizes was 5.97 per cent at the start of this week. 

The typical two-year fixed rate is 6.47 per cent.

As the big movements in mortgage rates over the past two years have shown, it is not always easy to predict where rates are going next.

However, borrowers can find a clue as to where the financial markets currently think rates are heading by looking at swap rates.

These are agreements in which two counter parties, for example banks, agree to exchange a stream of future fixed interest payments for a stream of future variable payments, based on a set amount.

Mortgage lenders enter into these agreements to shield themselves against the interest rate risk involved with lending fixed rate mortgages.

The five-year swap rate is currently at 4.6 per cent. In simple terms, that means the financial markets expect five-year fixed mortgages to be priced at that level in 2028. The two-year swap rate is at 5.1 per cent.

Experts say this means we are not likely to see rates fall below the next milestone, 4.5 per cent, in the short term – although rates could still fall further from their current levels. 

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘Now that swap rates have settled and lenders have more confidence as to where to price their products, we are seeing more innovation and better rates. 

‘Many think base rate is at or near its peak but even if this is the case, nobody can agree on what happens next – whether rates will plateau for a while or whether we will see sharp falls relatively quickly. 

‘What we do know is that lenders have money to lend and will have one eye on year-end so there will be more competitive offerings to tempt borrowers over the next few months.’ 

What to do if you need a mortgage 

Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.

This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value

What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. 

Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal. 

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.

You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check the best fixed rate mortgages you could apply for