Chelsea's record-low, fixed-rate mortgage deal could spark a new price war

Just when borrowers thought good times in the mortgage market were coming to an end, a surprise, new offer could spark another price war.

Chelsea Building Society is offering a five-year, fix-rate deal at an all-time low rate of 3.19 per cent.

The offer, which massively undercuts competitors in the five-year market, is available to borrowers below 70 per cent loan-to-value (LTV) – as long as they first pay a hefty arrangement fee of £1,495.

"The fee aside, this is the lowest-priced, five-year, fix-rate mortgage deal we have ever seen. It signifies a fresh battle in the mortgage marketplace," said Andrew Hagger from Moneynet.

"Based on a 25-year mortgage term, the new Chelsea five-year fix is the top deal as long as you borrow more than £117,000 – anything below this figure then you're financially better off with the Co-operative Bank, courtesy of its 3.59 per cent rate (to 75 per cent LTV) with no product fee," Mr Hagger added.

Since its takeover of the Chelsea and Norwich & Peterborough building societies, the Yorkshire Building Society has been keen to grab market share. The record low, five-year deal should be seen in this context, according to David Hollingworth from the broker London & Country.

But regardless of the reasoning, the Chelsea offer reverses a recent trend for mortgage price rises.

"Over the past few weeks we have seen some fixed and flexible-rate mortgage rates rise by 0.2 or even 0.3 per cent. These rises reflect the fact that of late lenders are having to pay more to borrow money on the open markets crucial to funding these deals due to the worsening eurozone crisis," Mr Hollingworth said

Michael Ossi, a personal finance expert at comparison site uSwitch.com, hopes that the Chelsea offer prompts a renewed price war.

"Hopefully this will cause an increase in the number of five-year, fixed deals on the market, giving those looking for security more choice.

"The increased competition in this part of the mortgage market could also lead to a further fall in fees and rates for longer-term fixed mortgages, meaning those who want to budget and prepare for an increase in rates won't be too heavily penalised."

But Mr Hollingworth reckons Chelsea's headline rate may be as low as any borrower goes.

"First Direct may come in with something competitive... but I reckon as far as rates go I can't see a five-year fix coming in much cheaper than this," he said.

However, although Chelsea's offer is cheaply priced, it doesn't mean a fix is right for everyone.

"Bank of England base rate, currently 0.5 per cent, is likely to stay very low for the forseeable future. Therefore, it may be wise to look at the range of base-rate trackers out there at the moment.

"If you can find one, say 2 per cent above base rate, that represents quite a decent saving over even the Chelsea five-year fix," Mr Hollingworth added.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people
News
people And here is why...
News
peopleStella McCartney apologises over controversial Instagram picture
Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
PROMOTED VIDEO
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
News
i100
Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsWelsh town changes its name, but can you spot the difference?
Arts and Entertainment
Kristen Scott Thomas in Electra at the Old Vic
theatreReview: Kristin Scott Thomas is magnificent in a five-star performance of ‘Electra’
Life and Style
Couples who boast about their relationship have been condemned as the most annoying Facebook users
tech
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
News
i100
Life and Style
The spring/summer 2015 Louis Vuitton show for Paris Fashion Week
fashion
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

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Trust Accountant - Kent

    NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

    Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

    £18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

    Law Costs

    Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

    Day In a Page

    Italian couples fake UK divorce scam on an ‘industrial scale’

    Welcome to Maidenhead, the divorce capital of... Italy

    A look at the the legal tourists who exploited our liberal dissolution rules
    Time to stop running: At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity

    Time to stop running

    At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
    Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

    Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

    The vintage series has often been criticised for racial stereotyping
    An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

    An app for the amorous

    Could Good2Go end disputes about sexual consent - without being a passion-killer?
    Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

    Llansanffraid is now Llansantffraid

    Welsh town changes its name, but can you spot the difference?
    Charlotte Riley: At the peak of her powers

    Charlotte Riley: At the peak of her powers

    After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
    She's having a laugh: Britain's female comedians have never had it so good

    She's having a laugh

    Britain's female comedians have never had it so good, says stand-up Natalie Haynes
    Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

    Let there be light

    Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
    Great British Bake Off, semi-final, review: Richard remains the baker to beat

    Tensions rise in Bake Off's pastry week

    Richard remains the baker to beat as Chetna begins to flake
    Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

    A look to the future

    It's time travel fashion at Louis Vuitton in Paris
    The 10 best bedspreads

    The 10 best bedspreads

    Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
    Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

    Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

    This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
    Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

    The children orphaned by Ebola...

    ... then rejected by surviving relatives over fear of infection
    Pride: Are censors pandering to homophobia?

    Are censors pandering to homophobia?

    US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
    The magic of roundabouts

    Lords of the rings

    Just who are the Roundabout Appreciation Society?