Tesco is scaling new heights with a distinctive move, as it announces the launch of the cheapest mortgage in Britain, at a rate of just 1.99%, which would help a typical borrower of a £150,000 mortgage, better off by £2,300 a year better off than the average two-year fixed rate of 4.44%.
The Tesco mortgage deal is fixed for two years and requires a 40% deposit and carries a fee of £995. Tesco will alsp offer a free valuation and legal fees, and borrowers with a Clubcard will receive one point for every £4 they spend on repayments.
Under the Tesco mortgage deal, and with the average property price of £163,376, buyers would have to find a £65,350 deposit. However, experts said the tempting rate is likely to begin a price war among rival banks.
Boosting competition in the mortgage market, Tesco’s new range includes a market-leading two year fixed-rate mortgage at 1.99%, down from 2.64% previously, in spite of this, borrowers would need a hefty 40% deposit to take out the deal.
Tesco has also cut the mortgage rate on another a two-year fix from 2.79% to 2.39% for borrowers with a 30% deposit. Tesco said it was able to slash the rates due to its plans to use the government’s Funding for Lending scheme to kick-start lending by offering banks access to cheap funding.
Figures released by Council of Mortgage Lenders released showed the value of home loans approved in September was 15% lower than at the same time in 2011. Tesco launched into the mortgage market in August, and offers loans-to-value (LTVs) at up to 80%, apart from a range of banking and insurance products, with plans to launch cash Isas before the next tax year begins.