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Virgin Money pulls all its 5% deposit mortgage deals in new blow to first time buyers

Lender Virgin Money pulled its “riskier” deals for new customers  (PA Archive)
Lender Virgin Money pulled its “riskier” deals for new customers (PA Archive)

Virgin Money has pulled all its 5% deposit mortgages from the market in another blow to first time buyers.

The lender told brokers last night it had removed the 95% loan to value deals for new customers “temporarily” as “we review our homebuyer proposition and monitor market conditions.”

Jonathan Burridge of mortgage broker, We Are Money, said : “This last comment about market conditions worries me. Are we going to start to see low deposit mortgages disappear like we did at the start of Covid?”

The move comes amid growing fears that a falling property market could leave buyers with only small deposits saddled with Nineties style negative equity.

The Office for Budget Responsibility said last week it expected prices to fall by 9% over the next two years but some commentators have predicted much biggerr .

Hundreds of mortgage deals were pulled in the wake of the disastrous mini-Budget in September but numbers have gradually been climbing again.

However, there will now be fears that other lenders will follow Virgin money’s example making it even harder for first time buyers with only small deposits to climb on the housing ladder.

Graeme Cox, director of brokers Self-employed Mortgage Hub, said: “It is likely that many other lenders will follow suit and cancel their 95 percent LTV deals as the extent of the fall in home prices becomes more apparent with each passing day.

“But in a sense, lenders are doing a favour to borrowers with only a 5 percent deposit.

“If you lose your job and fail to make your mortgage payments, not only will you lose your home, but if the lender fails to repay the full amount of the loan when selling the property at auction, they will continue to pursue. you for the difference. Not good.’

But Craig Fish, founder and director of brokers Lodestone Mortgages & Protection, said: “If more lenders start to pull rates at 95%, then this is going to have a dramatic effect on first-time buyers with only a small deposit. However, for now at least, I’m not convinced that this is going to be a market-wide problem.

“For example, you’ve still got the likes of Nationwide who are in fact reducing rates at this level of deposit. I think there’ll be greater visibility going into the New Year and believe that this move is more about managing workloads than a lender running for the hills.