Virgin Money has unveiled ‘Fix and Switch’, a unique mortgage product combining a 5-year fixed rate’s stability with the option to switch after two years without early repayment charges.
This new offering is targeted at residential purchase customers, with options for 85% and 90% loan-to-value (LTV) categories.
The product includes a 5.14% fee saver at 85% LTV and a 5.27% fee saver at 90% LTV, both offering a £500 cashback incentive. Affordability for ‘Fix and Switch’ is assessed on the basis of a five-year deal.
David Hollingworth, associate director at L&C Mortgages, comments on the launch: “The mortgage market has provided so many ups and downs in the last couple of years that it’s understandable that borrowers will be struggling to decide on the best approach.
“Virgin Money’s innovative product offers an alternative and welcome solution to those that feel there’s room for rates to improve over the next couple of years but don’t want to be caught out if the outlook shifts again.
“There will no doubt be customers attracted to the ongoing certainty of rate if required but with the flexibility to review in two years.”
Craig Calder, head of secured lending at Virgin Money, explains the product’s appeal: “In today’s higher interest rate environment, many mortgage borrowers are looking for long-term payment certainty, but don’t want to be tied in for the long-term.
“Fix and Switch is the perfect solution for them, providing the certainty of a five-year fixed rate with the flexibility of a two-year ERC if rates begin to fall.”
Nick Mendes, mortgage technical manager at John Charcol, welcomed the launch: “This latest deal from Virgin is certainly one for the records, lenders typically compete on price and criteria but this deal is a hybrid of both.
“Fixed rates are expected to reduce over the next few years, but nothing is certain especially when we consider the global uncertainty. Clients want stability but tend to opt for a 2-year fixed as no one wants to be tied into a higher rate for longer than necessary.
“Having a 5-year fixed with no early repayment charges after two is a welcomed move and another demonstration how lenders are actively working in ways to attract new business.”
Further reaction
Riz Malik, founder & director at R3 Mortgages:
“Virgin’s strategy is intelligent and precisely what the market requires as it fills the gap for clients who may want to hedge any increases but take advantage of future cuts and are prepared to pay a premium for that.
“It’s crucial for lenders to strive for innovation and not just compete on interest rates. This approach should serve as a benchmark for other lenders, likely prompting their product development teams to put in extra effort to keep pace.”
Akhil Mair, director at Our Mortgage Broker Limited:
“In a market where flexibility and transparency are increasingly valued, Virgin Money’s Fix and Switch mortgage emerges as a beacon of progress. It’s a testament to Virgin Money’s dedication to empowering homeowners and reshaping the mortgage landscape for the better.”
Justin Moy, managing director at EHF Mortgages:
“Clever product design from Virgin Money, providing both long-term stability and a way of changing the deal part way through without penalty, ideal if rates have moved a long way during that time.
“The most important aspect of this is the extended affordability that lenders can apply to longer-term products, giving significantly more borrowing capacity to those moving home. A win-win-win product.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“This is a great product innovation offering borrowers both some long-term rate security with the added flexibility of being able to review after two years should that be beneficial. This added flexibility will of course come with some rate cost but may be a fantastic option for those caught deciding between two and five year fixed options.”
Gary Bush, financial adviser at MortgageShop.com:
“More groundbreaking initiatives from another UK High Street lender with this announcement from Virgin – a 5-year fix that can be renegotiated in years time, should rates fall, will really help struggling and confused consumers. Well done UK financial companies for keeping the mortgage competition war raging into 2024.”
Peter Stamford, mortgage expert at The Mortgage Uni:
“Virgin money are letting borrowers have their cake and eat it. 5-year fixed rate with only two years early repayment charges, meaning you can swap after two years if you choose. Yes please.”
Gareth Davies, director at South Coast Mortgage Services:
“Excellent product for the right people, especially when affordability is based on a 5-year basis. Get some at lower LTVs too and really mix it up.”
Ross Lacey, director & chartered financial planner at Fairview Financial Management:
“It’s great to see more innovation like this. There’ll undoubtedly be cases where this kind of product could work really well for borrowers given the flexibility it offers, alongside some security against rate rises.”
Rowan Frayling, managing director at J Finance Ltd:
“Virgin should be praised for bringing some product innovation into the market rather than just rate wars! This is an interesting option for the right client and something that should grab attention!”
Scott Taylor-Barr, principal adviser at Barnsdale Financial Management:
“For those borrowers who are struggling to decide between the security of taking a 5-year fixed rate but concerned at the thought of being tied into a deal for that length of time, Virgin Money have now delivered the perfect solution.
“It’s also great to see this sort of innovative thinking from lenders, as it shows that they are competing with each other, and that interest rate and overall cost is no longer the only battleground.”
Lee Gathercole, co-founder at Rebus Financial Services:
“Hats off to Virgin Money, this is just the kind of innovation we need. This will help those nervous first-time buyers & homeowners who are hesitant to tie in for five years but also are struggling to get the borrowing they need to get onto the property ladder or move home.”
Elliott Culley, director at Switch Mortgage Finance:
“This will be a good option for borrowers looking for the security of a 5-year fixed rate, whilst keeping their options open after two years in case rates have reduced.
“This product is more expensive than other 5-year fixed products and even some 2-year fixed products offered by other lenders, but the premium is understandable considering the flexibility of the product. It will be interesting to see if this product becomes popular with borrowers over the coming months. It will certainly attract more risk-adverse clients with the flexibility.”
Graham Cox, founder at Self Employed Mortgage Hub:
“This eye-catching move from Virgin shows the innovation required to compete in today’s market. Especially for lenders who aren’t topping the cheapest rates table. It’s likely other lenders will follow suit in short order. Forget price wars, the new normal is early repayment charge wars.”
Rohit Kohli, director at The Mortgage Stop:
“Great to see a lender try new things and this product will certainly be of interest to many borrowers who want security but not be tied in with eye-watering penalties to switch to lower rates. Very impressed with Virgin for bringing this out.”
Jack Tutton, director at SJ Mortgages:
“Another lender trying to simulate the market with an innovative new product which is competitively priced. I feel that this could be attractive to potential purchasers by giving them long-term assurances in their payments with the ability to review it after two years without penalty. It is interesting to note though that this is only available currently at higher loan to values for purchases only, Virgin are clearly trying to assist this sector of the market.”
Jamie Alexander, mortgage director at Alexander Southwell Mortgage Services:
“This product stands as an excellent choice for individuals with a suitable financial profile, particularly when assessing affordability over a 5-year period. Introducing variants with lower loan-to-value ratios would be great. For those navigating the decision between the stability afforded by a 5-year fixed rate and the reservations associated with committing to an extended agreement, Virgin Money has introduced a highly viable solution. The implementation of this strategy by Virgin is commendable.”
Richard Jennings, founder & managing director at Richard Jennings Mortgage Services:
“What’s not to love about this product? the launch of this product offering from Virgin really does hit a huge segment of the market. With many clients looking at higher rates, they are tempted by the often cheaper deals at five years, but don’t like the sting that if rates fall they will be stuck paying more.
“Often it’s a which is the lesser of two evils, pay more now but review sooner or obtain the cheaper deal now but be stuck with it for five years. Virgin’s innovative approach in the five year fix market will I am sure be in huge demand. I just hope their service levels and product offering are around for more than a few days so clients can actually benefit from this.”
Simon Bridgland, broker/ director at Release Freedom:
“A masterstroke by Virgin, almost giving the best of both worlds. I can see this being picked up by quite a few clients given the uncertainty with rates. The only negative is that the rate is a little high compared to the best 5-year deals and 2-year deals, thats said it’s a hell of a safety net for those wanting to hedge their bets. I wonder if the competition will follow suit with their own similar offering, the appetite is there for innovation like this.
Amit Patel, adviser at Trinity Finance:
“Game Changer! A bold, innovative move by Virgin Money. This will be of benefit to borrowers who want surety of a long-term fix but have the flexibility to switch in two years without having to incur a penalty. Virgin more than deserve all the plaudits, it will be interesting to see if other lenders bring out a similar proposition.”
Robert Timm, managing director at Sunland Mortgages Limited:
“This is a really interesting concept. We’ve seen in the past where lenders will do a switch and fix option, but that means staying with the same lender. If I am understanding the concept correctly, this means the client could sell, or remortgage, after 2 years without incurring an Early Repayment Charge. This affords clients and brokers greater flexibility and can only be seen as a positive.”
Hannah Bashford, director at Model Financial Solutions:
“This is a great initiative and will give some borrowers the ‘best of both worlds’- security that they may want from a long-term fixed, but the flexibility to remortgage without penalty if rates reduce. Affordability is also a key issue so having this based on the 5-year lending levels will help more people to get the lending they need but allow them to re-assess in the short-term.”
Steven Morris, advising director at Advantage Financial Solutions:
“Whilst this is nothing innovative as Coventry has been doing this for years, it is timely, unique (no one else is doing it currently, Coventry included) and in tune with the customer needs of the day. Much like a miniature version of Perenna’s pricing, this should be seen as a 2-year fix, with an extra three years thrown in for free. When viewed this way, it is amongst the absolute cheapest 2-year fixes on the market, but allows the customer to borrow more because of the 5-year fix stress rates.
“Coupled with Virgin’s 20%-30% affordability increase across multiple lending scenarios since the beginning of the year, and also combined with other criteria leaps forward since Andy Cooke took the wheel of the national account manager role, Virgin Money may finally be a real force to be reckoned with in intermediary mortgages. Now if only they could sort out the VMO system…”
Ben Tadd, director at Lucra Mortgages:
“These new exclusive products should gain a fair bit of traction, as they provide the perfect level of security for the next five years, with a huge amount of added flexibility.
“Borrowers who elect to apply for these products will have the perfect storm, having the ability to take advantage of much anticipated improved market conditions and more competitive rates after the initial two years, assuming the market improves, whilst still being able to sleep easy at night knowing their rate is fixed for the next five years.
“It will be interesting to see how many lenders potentially follow suit with similar offerings over the next few weeks.”
