The lender claimed the rate is a direct result of advanced plans to borrow from the Funding for Lending Scheme (FLS) managed by the Bank of England.
The mortgage rates start at 1.99% for a two-year fixed rate and 2.39% on a two-year fixed rate to 70% LTV, which are cuts of 0.65% and 0.40% respectively.
The product fee starts at £800, with a booking fee of £195 on purchase and remortgages.
Customers taking out a mortgage with Tesco Bank will also receive a ‘thank-you’, said the lender, with Clubcard points as they repay their mortgage, collecting one point for every £4 on their monthly mortgage repayments.
Benny Higgins, chief executive of Tesco Bank, said: “We welcome the Funding for Lending Scheme, and are delighted to be able to pass on the benefit to our customers.
“We are committed to responsible lending and hope to enable our customers to borrow a further £1bn, over the next year, at affordable rates.
“We are well positioned to meet the financial needs of Tesco customers in more ways and I am delighted we are now able to offer these market leading mortgage rates, in addition to our popular and growing range of banking and insurance products.”
Andrew Hagger of Moneycomms.co.uk said on pricing, the new mortgage lenders has come a long way in a short space of time.
“Since that initial launch on 6 August, Tesco Bank has really upped its game and the latest rate cuts announced today will give its high street rivals something to think about,” said Hagger.
“This is the third set of rate reductions in a little over six weeks, with the latest round on the back of the bank’s application to join the Funding for Lending Scheme (FLS). The sub 2% rate for the 60% LTV two-year fixed deal will be the deal that grabs all the headlines, with the rate cut by 0.65% and £300 shaved off the product fee, just ten days after it was originally launched.”