Tesco sparks price war with cheapest mortgage in Britain: Supermarket offers rate of 1.99% (but you do need a 40% deposit)
- The deal would leave a typical borrower with a £150,000 mortgage £2,300 a year better off than the average two-year fixed rate of 4.44 per cent
- The Tesco Bank deal is fixed for two years and requires a 40 per cent deposit and carries a fee of £995
Britain’s cheapest mortgage will be launched today by Tesco at a rate of just 1.99 per cent.
The deal would leave a typical borrower with a £150,000 mortgage £2,300 a year better off than the average two-year fixed rate of 4.44 per cent.
Peter Gettins, of broker London & Country, said: ‘If you are looking for a mortgage this is an absolute cracker. Taking it out is a no-brainer. Hopefully, other lenders will try to match it.’
Bargain: Britain's cheapest mortgage will be launched today by Tesco at a rate of just 1.99 per cent
The Tesco Bank deal is fixed for two years and requires a 40 per cent deposit and carries a fee of £995.
Tesco will throw in a free valuation and legal fees and borrowers with a Clubcard will receive one point for every £4 they spend on repayments.
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The next cheapest two-year fixed-rate loan of its type is with Santander, at 2.39 per cent and a £1,995 fee. Last year, Leeds Building Society also offered a fixed rate of 1.99 per cent. However, its fee was £1,999.
Under the Tesco deal, and with the average property price of £163,376, buyers would have to find a £65,350 deposit. However, experts said the rate would spark a price war among rival banks.
Tesco said it could offer the rock-bottom deal because of the Government’s Funding for Lending scheme which aims to kick-start the economy and end a mortgage famine by handing out £80billion to Britain’s banks.
Deal: Tesco will also throw in a free valuation and legal fees and borrowers with a Clubcard will receive one point for every £4 they spend on repayments
But critics said Tesco should be using the cash to do more for borrowers with small deposits.
Yesterday, figures from the Council of Mortgage Lenders released showed the value of home loans approved in September was 15 per cent lower than at the same time in 2011.
Figures from the Yorkshire Building Society showed that first-time buyers must scrimp and save for eight years to raise the average £26,000 deposit needed for a first home.
Aaron Strutt, of brokers Trinity Financial, said: ‘It seems a shame Tesco isn’t using the Funding for Lending money to offer help to people who really need it – those with small deposits.’
Benny Higgins, chief executive of Tesco Bank, said: ‘I am delighted we are able to offer these market-leading rates.’
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