Homeowners could pay less than 1% interest if they remortgage, after a new home loan is launched by one of the UK’s major lenders.
The TSB is now offering a two-year fixed rate of 0.99% to those with a deposit of 40% or more and refinancing their home loan. Those who buy a property will have to pay a higher rate of 1.09 percent.
According to mortgage brokers, two-year fixed rates with interest as low as 0.99% have not been seen since 2017.
Lowest: Mortgage rates are at an all-time low, with some charging less than 1% interest
Lenders have become cautious as the coronavirus pandemic lockdown begins, pulling mortgage deals off the market and raising some rates.
However, the intense activity of the floating housing market since summer 2020 has prompted them to be more competitive, launching attractive offers to attract customers.
Meanwhile, major UK banks recently reported that the impact of Covid-19 has not been as severe as expected and some have released money set aside to deal with bad debts.
In historical terms, mortgage rates have remained very low in recent years.
Borrowers who agree to the deal with TSB will have to pay a fee of £ 1,495. A rate of 1.14 percent is available for a fee of £ 995, and there is a no-charge option with a rate of 1.96 percent.
The equivalent for homebuyers is 1.09 percent, with a fee of £ 995 – one of the lowest rates currently available in this market.
Mark Harris, Managing Director of mortgage broker SPF Private Clients, said: “Just when you thought mortgage rates couldn’t go down, TSB is launching a two-year fixed rate less than 1% remortgage deal.
“It’s not just a crack rate, but borrowers get two years of certainty and protection against possible interest rate hikes.
“With financing costs remaining low and lenders with plenty of cash to lend, we may well see other lenders follow suit and lower their mortgage rates in the weeks to come.
A TSB spokesperson added, “We are happy to offer a truly competitive rate that will help those looking to remortgage get the most out of their money. “
Competitive: TSB lender launched first low rate of 0.99% for remortgagors
Watch out for fees, this may not be the cheapest offer
Previously the lowest interest rate available for remortgage with a 40% deposit was 1.03% with NatWest, also with a charge of £ 1,495.
However, borrowers should be aware that they could still pay less overall if they took a higher rate with lower fees.
For example, a homeowner who mortgaged a £ 300,000 property with a 40 percent down payment would pay £ 8,878 per year at the TSB two-year rate of 0.99 percent.
But if they took Santander’s rate of 1.34% with just £ 49 in fees, they could cut their annual bill by £ 376.
You can compare rates to fees and find the deal that offers the cheapest monthly payments using This is Money mortgage calculator.
For those looking to fix for longer, the lowest interest rate currently available on a five-year remortgagors fix is currently 1.19% with charges of £ 1,494, also with TSB.
For the purchase, the best buy is NatWest’s 1.27% rate with a fee of £ 749, although lower interest rates are available with a higher fee.
The TSB’s 0.99% mortgage is not the first rate below 1% launched this year, although it is the first to offer the security of a fixed term.
Hinckley and the Rugby Building Society in April launched a two-year variable rate reduction for owners of homes with deposits of 40% or more in April, for example.
A discount mortgage is set at a certain amount lower than the lender’s standard variable rate for the duration of the fixed term – in this case, two years.
The lender is free to change their standard variable rate whenever they want, so that the amount borrowers pay may increase.
This week, data from financial experts Moneyfacts showed that the number of available mortgages was back to 75% of its pre-pandemic level.
Across all loan / value bands, the two-year average fixed rate declined very slightly month over month to 2.57 percent at the start of May, while the fixed rate five-year average increased very slightly to 2.79 per cent.
The reason it hasn’t fallen further is probably that several lenders have recently launched 5 percent deposit mortgages, some of which have interest rates over 4 percent.
Offers also last longer. Moneyfacts said that in April, the average retention period of a mortgage agreement increased from three days to 32, meaning borrowers now have more time to get the product they chose.
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