Virgin Money launches first sub-4% fixed rate home buying mortgage since October

Virgin Money launched a 3.99% mortgage deal  (PA Archive)
Virgin Money launched a 3.99% mortgage deal (PA Archive)

The first fixed rate home buying mortgage for buying a home to be priced at below 4% in more than four months was launched today in the latest sign that borrowing rates are slowly “normalising” after the sudden Autumn spike.

The ten year deal with an interest rate of 3.99% from Virgin Money will be seen as an important psychological milestone for borrowers reeling from the surge in borrowing costs over the past year. It is only available to buyers with a deposit of 25% and there are significant penalties for early repayment.

Lloyds has been offering a 3.99% 10 year fix since early December - but only for remortgaging, not for buying a home.

The Virgin deal comes on the eve of the latest rate decision from the Bank of England. Its Monetary Policy Committee is expected to order a half point rise to 4%.

That will increase bills for the estimated 20% of home owners on tracker or variable rate deals. But fixed rates have been steadily falling since they peaked in the Autumn at an average of around 6.5% after the September mini-Budget.

The Virgin deal was welcomed by brokers and advisers. Justin Moy, managing director at brokers EHF Mortgages, said: “This is great news and a significant landmark in the current market. Long-term, low loan-to-value fixed rates were always going to be the first to go sub-4%, although for many that may be too long to fix. Either way this is a hugely positive step, and will encourage other lenders to participate. This is all very healthy competition and good news for borrowers.

Kylie-Ann Gatecliffe, director at broker KAG Financial, said: “This is another step in the right direction, although clearly 10-year fixed rates are quite a niche area, as many people don’t feel comfortable committing to a mortgage rate for that length of time. So while it is a great reduction, I’m hoping we will see a domino effect with 5-year and 2-year offerings.”