Mortgages  

Virgin Money bolsters 95% LTV mortgage range

Virgin Money bolsters 95% LTV mortgage range

Virgin Money has added a 95 per cent loan-to-value mortgage product to its armoury amid a wave of lenders re-entering the minimum deposit space.

The three-year fixed rate mortgage is set at 3.64 per cent, which is the same rate as its two-year 95 per cent loan-to-value product.

The two-year mortgage has been cut by 15 basis points in line with other cuts made across the industry.

Earlier this month, Virgin also relaunched its 95 per cent loan-to-value shared ownership deals.

The lender first re-entered the 95 per cent loan-to-value space in May with the help of the UK government’s Mortgage Guarantee Scheme.

Virgin’s latest low deposit product offers borrowers £1,000 cashback.

Return to high LTV

A series of firms have relaunched their 95 per cent loan-to-value products of late, after pandemic-induced hikes in minimum deposit requirements left mortgages above 90 per cent at their lowest level since 2007 in Q1 this year.

Statistics published by the Financial Conduct Authority this month suggested the share of mortgages above 90 per cent loan-to-value was 1.1 per cent, 4.1 percentage points lower than a year earlier.

Lenders which have re-entered the space include Newcastle Intermediaries and Accord Mortgages.

Newcastle Intermediaries unveiled two and five-year 95 per cent loan-to-value mortgages at fixed rates of 3.80 and 3.89 per cent, respectively. Whilst Accord Mortgages cut the rates on its 85, 90 and 95 per cent loan-to-value products in a bid to help brokers compete for borrowers with smaller deposits.

But some lenders are wary of lower deposit mortgages, particularly for new builds. Skipton Building Society is holding back on launching 95 per cent loan-to-value products for new builds due to the risk of first-time buyers falling into negative equity.

This is why it has launched two new build mortgage products at 90, rather than 95, per cent loan-to-value.

Jenna Cauvin, a product manager at Skipton, told FTAdviser earlier this week: “We’ve only gone back in with 90 per cent loan-to-value for new build houses because we need to remain a responsible lender.”

Cauvin said borrowers with a 5 per cent deposit who sell their property in the short-term, such as a year later, run the risk of falling into negative equity. 

“We don’t want this. Everyone has their different appetites for risk. But the evidence around the new build premium has informed our decision not to go down that route.”

ruby.hinchliffe@ft.com