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Competition in the mortgage market has been intense for some time, and happily for borrowers, it doesn't show any signs of stopping! Indeed, providers seem to be continually looking to lower their rates and beat their competitors, and things have just stepped up a notch with the launch of the lowest tracker mortgage rate ever seen!
This two-year tracker deal is available from Tesco Bank and is priced at just 0.98%, provided you've got a 40% deposit, as it's offered at a maximum of 60% loan-to-value (LTV). It comes with a fairly hefty fee of £1,495, but for some, the trade-off of a sub-1% rate could be more than worth it. Just make sure you do your sums, as Charlotte Nelson, finance expert at moneyfacts.co.uk, explains:
"This new 0.98% variable tracker rate from Tesco Bank has taken the market by storm, entering as the lowest deal on moneyfacts.co.uk records. With this record low rate it's likely to attract borrowers looking to minimise their monthly repayments, but with a large fee of £1,495, borrowers must ensure they look at the true cost of the mortgage to see if this is the right deal for them."
Whether or not it works for you, it can't be denied that this is an impressive rate – and it isn't the only cut-price deal available, either. Variable mortgage rates have been falling fairly consistently in recent years, and the base rate cut of last August provided an even bigger boost – tracker mortgage rates typically track base rate, so it follows that when base rate is cut, mortgage rates will follow!
As the table below shows, the average two-year tracker rate has fallen sharply in the last year, with the last six months noting a particularly rapid downturn. This means that, if you're comfortable with the fact that your repayments aren't guaranteed, now could be a great time to consider such a mortgage.
|A Year Ago ||6 months Ago||Today|
|Average two-year tracker rate||2.06%||2.02%||1.88%|
|Source: Moneyfacts.co.uk||Compiled 23/05/2017|
"With base rate expected to remain low for some time, borrowers can use this opportunity to take advantage of some low deals in the variable market," added Charlotte, and you just have to take a look at the best variable rate mortgages available to see the appeal.
Many are priced far lower than their fixed rate counterparts, and if you're after a discounted variable rate mortgage, you could find an even better deal: Yorkshire Building Society has a deal priced at just 0.89%, the lowest ever mortgage rate on record, so there's really something for everyone!
However, it's worth remembering that a variable rate mortgage shouldn't be entered into lightly. Their rates may be lower, but that's because they don't come with the same level of security as fixed rate options – rates can go up as well as down, which means that, if base rate were to rise and your mortgage rate followed suit, you may find yourself with far higher repayments than you were expecting.
It isn't just base rate, either. Variable rate lenders are largely free to amend their rates based on a range of economic factors, so there's simply no guarantee of what you'll be paying a few years or even months from now. This is why you need to be certain that your finances can absorb any increase in repayments – you'll undergo strict affordability tests, of course – but if you can, get searching!
Use our mortgage calculator to find the best mortgage for your needs, and see if you can take advantage of the ever-escalating mortgage rate war.
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