The cheapest mortgage in Britain: Tesco launches 1.99% mortgage - but you need a hefty 40% deposit

 

Tesco will today launch Britain’s cheapest mortgage, slashing its rates to as low as 1.99 per cent and effectively starting a price war in the mortgage market.

The new range of mortgages includes a market-leading two year fixed-rate plan at 1.99 per cent, down from 2.64 per cent, although borrowers need a hefty 40% deposit to take out the deal.

Tesco has also dropped the rate on another a two-year fix from 2.79% to 2.39% for borrowers with a 30% deposit and said it was able to make the rate cuts due to its plans to use a Government scheme to kick-start lending by offering banks access to cheap funding.

Both the Tesco deals also carry fees of £995 and are available to customers who are remortgaging or buying a new home.

Rachel Springall, spokeswoman for comparison website Moneyfacts, said the last time a similar fixed deal was offered at 1.99% was around a year ago.

She said: “It's great to see Tesco Bank offering some attractive rates, especially breaking the 2% barrier.

“The new two-year fixed deal from Tesco Bank will become the market leader at 1.99% with a £995 fee and will require a 40% deposit. In addition the two-year 2.39% deal with a £995 fee will be the lowest rate for 30% deposits.

“Customers will be able to acquire Clubcard points on each monthly repayment, where they can redeem them as vouchers to use in Tesco stores.”

The supermarket giant only launched into the mortgage market in August, and offers loans-to-value (LTVs) at up to 80%, alongside a range of banking and insurance products, with plans to launch cash Isas before the next tax year starts.

Mortgage availability has generally increased since the Bank of England and the Treasury launched the £80 billion funding for lending scheme at the start of August, although many headline-grabbing rates have been concentrated around people with larger deposits and have also come with significant fees.

Lenders have also toughened their borrowing criteria, meaning people have higher hurdles to jump to take out a mortgage.

The Council of Mortgage Lenders said yesterday that mortgage lending was 10% down in September compared with the previous month, which appeared to reflect a drop in the number of people looking to buy homes, while remortgaging levels also remain weak.

The Bank of England has suggested it could be towards the end of the year before the effects of recent improvements to lenders' ranges show up in any mortgage lending figures, due to the typical lag of two to four months between mortgage approvals and sales taking place.

Benny Higgins, chief executive of Tesco Bank, said: “We are committed to responsible lending and hope to enable our customers to borrow a further £1 billion, over the next year, at affordable rates.”

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Recruitment Genius: Technical Report Writer

    £25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

    Recruitment Genius: Web Developer - PHP

    £16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

    Ashdown Group: Client Services Manager - Relationship Management - London

    £30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

    Greece elections

    In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
    Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

    Holocaust Memorial Day

    Nazi victims remembered as spectre of prejudice reappears over Europe
    Fortitude and the Arctic attraction: Our fascination with the last great wilderness

    Magnetic north

    The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
    Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

    Homeless Veterans appeal

    Homeless in Wales can find inspiration from Daniel’s story
    Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

    Front National family feud?

    Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
    Pot of gold: tasting the world’s most expensive tea

    Pot of gold

    Tasting the world’s most expensive tea
    10 best wildlife-watching experiences: From hen harriers to porpoises

    From hen harriers to porpoises: 10 best wildlife-watching experiences

    While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching
    Nick Easter: 'I don’t want just to hold tackle bags, I want to be out there'

    'I don’t want just to hold tackle bags, I want to be out there'

    Nick Easter targeting World Cup place after England recall
    DSK, Dodo the Pimp, and the Carlton Hotel

    The inside track on France's trial of the year

    Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
    As provocative now as they ever were

    Sarah Kane season

    Why her plays are as provocative now as when they were written
    Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

    Murder of Japanese hostage has grim echoes of another killing

    Japanese mood was against what was seen as irresponsible trips to a vicious war zone
    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore