Virgin Money has withdrawn its 5 per cent deposit mortgages from sale temporarily to allow it to review ‘market conditions’.
It comes amid fears that house prices may fall in the coming months and years, leaving those with large mortgages exposed to the risk of negative equity.
The products have not been available to new customers since 8pm last night, and mortgage brokers have been advised to send any outstanding applications to the lender ‘as soon as possible’.
![Virgin Money has withdrawn its 5% deposit mortgages from the market for new customers](https://i.dailymail.co.uk/1s/2022/11/23/09/59021431-11460917-image-a-1_1669196908052.jpg)
Virgin Money has withdrawn its 5% deposit mortgages from the market for new customers
Existing Virgin Money customers wanting to transfer their mortgage to a 5 per cent deposit product, also known as 95 per cent loan-to-value, with the bank can still do so.
Virgin Money told This is Money: ‘We’ve made the decision to temporarily withdraw our 95 per cent LTV range for new customers as we review our homebuyer proposition and monitor market conditions.
‘Our 95 per cent LTV range remains available to existing customers for product transfer.’
Mortgage brokers have voiced concern about what the move means for first-time buyers, who are the main users of low-deposit mortgages.
If other lenders followed Virgin Money’s lead, it could become more difficult for those getting on the property ladder to find a suitable mortgage.
Mortgages with smaller deposits are riskier for lenders, as the repayments are usually higher and the chance of negative equity greater in the event of house price falls.
It means they sometimes withdraw them from sale at times of financial uncertainty, as they did at the beginning of the Covid-19 pandemic.
Jonathan Burridge of mortgage broker, We Are Money, said: ‘This last comment about market conditions worries me. Are we going to start to see low deposit mortgages disappear like we did at the start of Covid?’
But others said the move was sensible in light of the fact that some economists are predicting large house price falls.
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial, said: ‘Considering many economists think there could be a fall in house prices of up to 30 per cent, I am only surprised [10 per cent deposit] mortgages are still available.
‘Five per cent is a wafer thin layer of equity in a falling market from a risk management perspective so I would expect to see the end of these for the next 12 months.’