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.
Remortgage deal: Virgin’s 4.9% offer comes as most lenders are offering their best rates to those purchasing a home
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.
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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.’
Market movement: Most high street lenders have reduced mortgage rates in recent weeks
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.’
This post first appeared on Dailymail.co.uk
