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Tesco launches two-year fixed rate mortgage at 1.99%
Supermarket giant Tesco is giving the banks a battering with this market-leading two-year fixed rate mortgage.
Tesco launches two-year fixed rate mortgage at 1.99%
Tesco Bank is becoming more and more aggressive in its ongoing battle with Britain's banks.
For example, the UK's biggest supermarket slashed its personal loan rates last month, temporarily sending them right to the top of the best buy tables.
Now Tesco Bank has opened another front in the war for borrowers by launching a low-rate mortgage that is an instant table-topper. This is pretty impressive, given that the retailer only entered the mortgage market two months ago, in early August.
A home loan under 2%
Tesco has cut rates across its entire two-year, fixed-rate range for borrowers with deposits ranging from 30% to 40% of the purchase price.
For a two-year fix with a deposit of 40%, Tesco has cut its yearly rate by a whopping 0.65%. Here's what makes this deal today's clear market leader in its category:
Lender | Tesco Bank |
Rate | 1.99% fixed for two years |
Upfront fee | £995 |
Incentive | Free legal fees and free valuation for remortgages Clubcard points: one point per £4 of monthly mortgage repayments |
According to Moneyfacts, the last time borrowers could bag a similar deal below 2% was a year ago, courtesy of Leeds Building Society. With a deposit of 40%, the average two-year fixed rate today is 4.15% a year, which is more than double Tesco Bank's rate.
Tesco batters the banks
To show you just how incredibly competitive Tesco Bank's deal is, we should check the entire mortgage market for the cheapest fixed-rate home loans over two years.
Based on a buyer (or remortgage customer) buying a £250,000 home with a £100,000 deposit and a low-rate loan of £150,000, here are the top five two-year fixes in this category:
Lender | Two-year fixed rate | Minimum deposit | Fees | Follow-on rate and APR | Notes |
1.99% to 31/12/14 | 40% | £995 | 4.24% 4.0% APR | Free legal fees and free valuation for remortgages | |
2.44% to 31/12/14 | 40% | £1,499 | 3.94% 3.8% APR | Valuation fee £197, legal fee £250 | |
2.49% to 31/01/15 | 40% | £1,495 | 4% 3.9% APR | Valuation fee £242, legal fee £250 | |
2.54% to 30/11/14 | 30% | £1,695 | 5.79% 5.4% APR | Valuation fee £325, legal fee £250 | |
2.59% to 30/11/14 | 40% | £1,994 | 3.99% 4.0% APR | Valuation fee £350, legal fee £250 |
Source: Moneyfacts
This table shows how spectacularly better Tesco Bank's latest two-year fix is than its competition.
Tesco is the only lender to charge a yearly rate below 2%. Indeed, the next-cheapest rate (from HSBC) is 0.45% a year higher. And it's the only lender to charge a fee below £1,000, with other lenders' fees ranging from nearly £1,500 to almost £2,000.
Frankly, for buyers or remortgage customers with deposits of 40% looking for a two-year fix, Tesco Bank wins by a country mile!
How a bank should be run
Benny Higgins, Tesco Bank's chief executive, promised earlier this week that the supermarket bank would lend at least £1 billion over the coming year at affordable rates. Clearly, with such ultra-low mortgage rates now on offer, the UK's number-one retailer aims to shake up Britain's ailing mortgage market!
Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online
At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.
This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage
More on mortgages:
Chelsea launches market-leading five-year fixed rate mortgage
Bank of Scotland fined £4.2 million for 'inaccurate' mortgage records
Why ignoring tracker mortgages will cost you £££
Precise Mortgages: top deals from lender you've never heard of
Nationwide pulls out of interest-only mortgage market
The best long-term fixed and tracker mortgages
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2Comments
24/10/2012 10:18
It's not serious competition though! ... As with all hese supposed great deal, they are aimed at those who do not need that much help anyway! ... With minimum deposit of 40% and an upfront fee of £995 you are looking at people needing either £45,000 + £995 fee or at least have a 40% equity in their current property plus a spare £995 just lying around!
If they have 40% equity already in their property the I would question if they actually need this deal and if they have £45,000 already saved up it isn't that big a deal to them anyway!
We seem to be fixated in this coutry with either helping those who already have moey and assests make the most of it or supposedly helping those at the bottom who either can't really afford it anyway or could do but would rather have a busy social life, nice car and nice clothes! (So prove they don't need help because they have the wrong priorities)!
What about the government or the banks actually doing it properly and helping out those who are kind of stuck in between, the ones thta were given a mortgage by greedy banks but kew they couldn't really afford them and are stuck in limbo, the ones who were encouraged to stretch by the banks and estate agents knowing they would be stuck for years to come! The ones who may actualy be able to help get the market moving again if given a little help!
The ones who only had 5-10% deposit and just managed to get on the market but are now being fecked off by everyone, the banks wo't re-mortgage to help them, the hoise prices have dropped so they don't have the extra equity they should have had and this was don't forget all done ad prolifferated by the banks when they had been deregulated. They are now ignoring people who have paid a good deposit and have paid their mortgage without fail for 5-6 years since the banks FAILED and would have collapsed if not HANDED their TAXES.
I know people who can't even qualify for their own homes that they are paying the mortgage on, who if their homes were taken back would be paying more in rent than on a mortgage are left in complete isolation and limbo!
As Mervyn King (Bank of England) once said, to get our economy going, to revitalise the sector that has always driven the housing market, the workig class. We know houses have been falsely and deliberately inflated by the banks and estate agents over the years, they are now currently 25% higher than they are actually worth, they need to be devalued by that 25% and in line with that the mortgages need to also be lowered in value and payments by that 25% so it will bring some sort of equalibrium to the market. People will then be able to afford to buy new homes, the people in them will be able to afford their mortgages and this in itself will free up the market as it needs.
If not, we can just sit back and watch it spiral out of control like it has done in Spain, Portugal, Italy, Ireland and Greece!
23/10/2012 14:29
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