What’s the deal?
Generally speaking, the longer you fix in your mortgage rate for, the more expensive that rate will be.
But our brand new exclusive from Virgin Money is a welcome exception to the rule!
At just 2.99%, fixed over six years, Virgin’s rate is the same – and in most cases, LESS – than even the very best five-year fixed rate deals on the market.
You will need a deposit of 30% to qualify, compared to the more typical 40% you tend to find attached to the very cheapest rates. The fee on the deal is a pretty typical £995 and – of course – it’s only payable ONCE over six years, opposed to three times if you took a series of two-year fixed rate deals.
Nevertheless, Virgin is also offering a fee-free version of its six-year fixed deal – but unsurprisingly, it comes with a higher rate of 3.59%.
But when comparing mortgages you should always look at the total amount you would repay, including fees, over the term of the deal, says consumer expert at MoneySuperMarket, Dan Plant:
“Here, the fee-paying version of the deal works out cheaper for anyone needing a larger-sized loan, while the fee-free is better for smaller loan sizes. Looking at the total cost of a mortgage – combining rate AND fee – is the only way to identify which product will be the best value to you.”
When the six-year term comes to an end, you'll revert to Virgin Money's standard variable rate. Currently this stands at 4.79%, though of course, it’s likely to have changed by 2020.
As is the case with most mortgage lenders, Virgin Money will allow you to overpay on the loan by up to 10% a year without penalty.
|“Mortgage rates simply can’t get much cheaper, but there’s every chance they will be a lot higher by 2020...”|
You’ll be tied in for the whole six years, which means you’ll have to pay early repayment charges (ERCs) if you want to leave before time.
The deal is available ONLY through MoneySuperMarket and mortgage brokers. Call 0800 177 7982 – the dedicated MoneySuperMarket phone number – and get straight through to Virgin Money. See the bottom of this article for opening times.
Who’s it good for?
Virgin’s six-year deal is an absolute cracker for more settled homeowners, perhaps with larger mortgages, who want to lock in today’s fantastically low borrowing rates for the longer term.
The main downside is the six-year tie-in which, ideally, requires you to stay put in your home for the same time.
This is why.
While the loan is portable – which means you can transfer it to other properties should you want to move – both you and the home you are buying will need to qualify for it all over again. And this can cause problems if your circumstances have changed, for example, one of you has given up work.
If you do qualify but need a bigger loan to buy your next home it’s unlikely to be lent at the same 2.99% rate. On the other hand, if you are downsizing and releasing equity, you won’t be able to pay back more than 10% in any one year.
Paying the loan off entirely if you want to sell up or remortgage will mean forking out the ERCs and – at a flat 5% of the outstanding loan for the whole six years – they’re not cheap.
You also won’t be able to apply for this deal online.
What’s the verdict?
For settled homeowners worried about the impact of interest rate rises on their monthly mortgage repayments, this deal could be a godsend. After all, mortgage rates simply can’t get much cheaper, but there’s every chance they will be a lot higher by 2020.
Dan Plant said: “By offering such a low rate over a market leading period of six years, and with relatively low deposit requirements, this deal should be accessible to many. Hopefully it’s a sign of further product developments to come that can genuinely help homeowners.”
Call today on: 0800 177 7982
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Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.