Virgin Money launches Help to Buy deals early

Virgin has unveiled its Help to Buy mortgages earlier than expected. We see how they stack up.

Virgin Money has joined the Help to Buy scheme a little earlier than expected.

The lender had indicated it would join the mortgage guarantee scheme side of the deal from January 2014, but has unveiled its range ahead of schedule.

The new Virgin Money Help to Buy mortgages consist of six fixed rate deals available to those with a 5%-10% deposit that want to purchase or remortgage.

Homebuyers with a 10% deposit can get a rate of 4.29% and those with a 5% deposit can get a rate of 5.29% on a two-year fixed rate deal.

There is also a choice of two three-year fixed rate deals. Those with a 10% deposit can get  a rate of 4.69%, while smaller deposits get a rate of 5.39%.

And for those that want a long-term option there are two five-year fixed rate deals of 4.89% with a 10% deposit or 5.49% with a 5% deposit.

None of the products come with a fee, and those looking to purchase rather than remortgage can claim £300 cashback to use on legal fees, valuation fees or the general cost of moving home.

How Help to Buy works

Help to Buy is the latest scheme from the Government designed to give people with small deposits a helping hand to buy a home.

The scheme is made up of two parts.

The first is the Help to Buy Equity Loan Scheme. Borrowers with at least a 5% deposit can get an equity loan from the Government worth up to 20% of the value of the property. The remaining 75% is provided via a Help to Buy mortgage from a participating lender.

This deal can be used to buy any new -build property worth up to £600,000 in England or £400,000 in Scotland. In England the equity loan is interest free for five years so you’ll only be paying interest on the mortgage during this time. But in Scotland the equity loan stays interest free, although you may have to repay more than you borrowed if the value of your home increases.

The second phase is known as the Help to Buy Mortgage Guarantee Scheme and was launched in October. It’s available across the UK on any type of property, not just new-builds, up to a value of £600,000.

Borrowers will again need a deposit of at least 5% but the Government acts as a ‘guarantor’ for the mortgage that can be up to 95% of the value of the property. In this scheme, the mortgage lender is charged an insurance fee for the guarantee from the Government which is priced into the rates on offer to borrowers.

For more read Help to Buy mortgages explained.

At the moment Barclays, Nationwide, NatWest, Halifax and Santander are taking part in the equity loans side of Help to Buy.

Halifax, NatWest, Bank of Scotland, Royal Bank of Scotland, HSBC and now Virgin Money are offering deals that are geared towards the mortgage guarantee scheme.

How Virgin compares 

So how does Virgin Money’s deals stack up against existing Help to Buy mortgage guarantee deals?

Below is a table comparing what’s on offer on a 95% loan-to-value from the main providers.

As you can see Virgin Money hasn’t really rocked the boat in terms of rates and all three of its 95% LTV deals enter near the bottom of the table. However, Virgin gives borrowers the choice of a three-year fixed rate and the mortgages are open to those that want to remortgage.

HSBC has the best rates on offer with a rate of 4.79% on a two-year fixed rate along with a £99 fee.

However it’s worth pointing out that there are a number of other lenders not participating in the Help to Buy Mortgage Guarantee Scheme which are undercutting Government-backed offerings.

Furness Building Society for example is offering a fee-free five-year fixed rate of 4.75% on a 95% LTV. However you will need to apply in branch to get this deal.

Elsewhere the Yorkshire Building Society also has some challenger rates on offer at the moment. For example it is offering a fee-free two-year fixed rate of 4.89% on a 95% LTV.

See how much a mortgage could cost you and get help from an expert mortgage adviser

This article aims to give information, not advice. Always do your own research and/or seek out advice from a regulated broker, before acting on anything contained in this article.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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Interest-only mortgages: the banks that will still lend

The questions you must ask before you buy a house

HSBC extends first-time buyer mortgage price promise

Bank of England to end Funding for Lending Scheme for mortgages