Virgin Money withdraws range of small deposit mortgages

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Virgin Money has decided to withdraw its range of mortgages which caters to homebuyers who have saved a 5% down payment.

Lenders have successively reduced their interest rates, the five-year average fixed rate fall below 6% for the first time in seven weeks yesterday (November 22).

Despite signs that the market is returning to normal, Virgin Money said yesterday it had made the decision to “temporarily withdraw” its range of 95% mortgages for new customers, as it “re-examines[s]» the product and « monitor[s] market conditions”.

The article continues after the announcement

The small deposit product will remain available to existing customers for product transfer, he confirmed in an email update.

This is not the first time that Virgin Money has pulled out of the market at 95% loan-to-value.

At the end of August, the lender recalled the product for a while – even though it was then lenders withdrew massively from the market.

Virgin Money’s latest withdrawal went into effect at 8pm last night. The lender notified brokers of the change just after 3:30 p.m.

Trinity Financial director Aaron Strutt said the lender would “probably be back in about a week”.

Last October brokers speculated that uncertainty surrounding former Chancellor Kwasi Kwarteng’s ‘mini’ budget would lead to ‘the death of the 95% loan-to-value mortgage’.

Just under two months ago, the risk of homeowners ending up with negative net worth was higher.

Mansfield-based mortgage manager Mike Staton said at the time that the easiest way for lenders to avoid this risk was to scrap 95% of loan-to-value mortgages.

These products were withdrawn during the pandemic when lenders tried to deal with a similar risk.

Lenders eventually came back with these small deposit products, but it took so long that the government was forced to step in to try and revive the market.

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