The launch of a two-year fix by Virgin Money “may be the quickest way we will see sub-5 per cent short-term deals in the coming months,” EHF Mortgages managing director, Justin Moy, has argued.
Moy’s comments follow Virgin Money’s announcement of a two-year fixed rate remortgage product at 5.09 per cent up to 60 per cent LTV, with a 1 per cent fee.
This was announced alongside several rate reductions.
The launch was greeted with positivity by brokers, such as from Moy who stated: “More product innovation from lenders can only be encouraged.”
A similar sentiment was shared by Charwin Private Client director, Ranald Mitchell, who explained: “It’s good to see more rate reductions but it is the introduction of percentage fees rather than flat product fees that grabs 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.”
Additionally, Switch Mortgage Finance director, Elliott Culley, stated: “Virgin is trying something different here while taking a leaf out of Skipton’s book of a charging percentage.”
Culley added that Virgin was a lender trying to find 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,” he added.
Caution
However, while there was a great deal of positivity towards the announcement, Yellow Brick Mortgage managing director, Stephen Perkins, added a note of caution.
“Whilst it is great to see two-year fixed rates edge ever closer to the sub-5 per cent zone, the 1 per cent product fee on a two-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.”
Importance
Stressing the importance of such products, Lifetime Wealth Management mortgage and protection specialist, Katy Eatenton, said: “Rate reductions are always a move in the right direction, even with a 1 per cent fee.”
While Eatenton acknowledged that the fee won’t work for everyone, she said that this is where having qualified advice prevails.
She explained: “Borrowers can assess all the options that are available to them and make an informed decision based on their circumstances and requirements”.
The Mortgage Co mortgage and protection adviser, Steven Hargreaves, stated that Virgin’s announcement is proof that the rate war is continuing.
“The headline rates are very good, and yet more evidence that the fixed rate war is continuing,” he explained.
“When advising on products you would always show a client the difference between a lower rate with higher product fees and a higher rate with no product fees.
“That said, to see these rates compared to what we were discussing a couple of months ago is fantastic.”
