Best fixed mort­gage rate drops be­low 1pc – again

The Daily Telegraph - Your Money - - YOUR MONEY - Olivia Rudgard

San­tander has brought back the sub-1pc mort­gage, with a fixed-rate deal at 0.99pc. The bank is of­fer­ing the loan to buy­ers with 40pc de­posits – and will fix the rate for 18 months.

Pre­vi­ously HSBC of­fered a mort­gage with the same rate but with­drew it in De­cem­ber, with many of its other best-buy deals.

San­tander’s of­fer be­comes the low­est fixed rate avail­able – only beaten by York­shire Build­ing So­ci­ety. Its 0.98pc tracker mort­gage is not fixed but will vary in line with Bank Rate.

Like many mort­gages with very low rates, San­tander’s deal comes with a rel­a­tively high fee of £1,499. This makes it less suit­able for bor­row­ers with smaller mort­gages.

Pre­vi­ously its low­est rate was a two-year fix at 1.14pc, with a £1,495 fee. It also of­fers a rate at 1.29pc, for buy­ers with 40pc de­posits, who would pay a fee of £999.

For some­one bor­row­ing £130,000 the monthly cost would be £495 dur­ing the fixed-rate pe­riod, com­pared to £511 un­der the old deal, in­clud­ing fees.

The 1.29pc deal is also fixed for six months longer, giv­ing the buyer more se­cu­rity.

When the fixed pe­riod ends, bor­row­ers are flipped to San­tander’s stan­dard vari­able rate, cur­rently 4.49pc – and so are likely to need to re­mort­gage again then.

If they don’t re­mort­gage swiftly, the higher stan­dard vari­able rate they re­vert to can rapidly erode the ben­e­fit of the lower in­tro­duc­tory rate.

The lender has also dropped rates on sev­eral of its other mort­gages. Its two-year fixed-rate mort­gage for first-time buy­ers with 10pc de­posits now has a rate of 2.24pc, with fees of £999.

Aver­age two-year fixed mort­gage rates fell to a 12-month low at the start of Jan­uary and have been ris­ing since. An­a­lysts pre­dict that they will now con­tinue to rise.

Many lenders cut their rates at the end of the year in or­der to meet busi­ness tar­gets but the cost of bor­row­ing by banks, known as the swap rate, has been ris­ing since last sum­mer.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.