Tesco Bank launches fixed 1.99% Mortgage
Tesco Mortgage Key Facts
- 1.99% Fixed until end 2014
- 4.24% There after
- 4.00% APR
- £995 Arrangement Fee (£195 Booking Fee, £800 Product fee)
- 60% Maximum LTV (Loan to Value)
- More suited for Remortgages than First Timer Buyers
Tesco has taken advantage of the government’s “Funding for Lending” scheme to launch the new rate, which is 0.65 % lower than any of its previous best fixed-rate mortgage.
The funding for lending scheme allows lenders to access funding at below market rates, as long as these will be given as loans to businesses and families.
The scheme was expected to help first time buyers who cannot get mortgages but in this case first time buyers are still not helped due to the 40% deposits required. It will be more useful for those wanting to remortgage and gain a monthly saving on installments. It is unclear at the moment whether they will allow this rate for buy to let mortgages. There is a early repayment penalty during the fixed period, however this is unlikely to effect many.
Leeds Building Society also offered a 1.99 % deal in 2011, but the fee was double at £1,995.
Funding for Lending is not having much impact on the mortgage market, in fact figures show that lending is down 15% on a year ago.
Overall the Tesco Mortgage does not fulfill the objective of Funding for Lending. However it is a great move for investors. The gap between base rate and lending rate is decreased. Further more householders can remortgage, reducing their monthly outgoings which can then be used to payoff higher interest debt as well as investment.
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UPDATE – FEBRUARY 2013
This product has now been taken off the market, seems to have been more a promotion and media tool than a genuine deal