“The best way to get lending out and secure customers is with low-rate deals. Every week lenders have been trying to go lower than each other,” said Rachel Springall, finance expert at Moneyfacts.
“With a lot of great rates currently concentrated at the 60 to 65% loan-to-value (LTV) level, there’s probably going to be a point where lenders focus on first-time buyers and those with a lot less equity,” she added.
Last week HSBC launched a two-year deal at 1.16% plus a £1,499 fee, which was immediately beaten by
Yorkshire Building Society, which rushed out a 1.14 % deal at 65% LTV. Yorkshire’s product comes with a £1,345 fee and can be taken as an offset mortgage with a rate of 1.34%.
David Hollingworth, associate director communications at London & Country, said: “You can’t rule anything out in the current market. Lenders continue tit for tatting and the magic sub-1% deal could be some way off but you never know with this kind of competitive tension.”
Springall said: “We’ve already had a sub-1% variable rate from HSBC but when a sub-1% fix comes it’ll probably be a two-year deal. But any customer going into these deals needs to think about the potential payment shock further down the line, as these products have higher Standard Variable Rates and a higher fee. It is all about true cost.”
This wave of lender competition appears to have been triggered by Governor of the Bank of England Mark Carney’s hints in February this year that Bank Base Rate could be cut further than its current record low of 0.5%.
The cheapest deal on record was launched by the Post Office last August, which was a two-year fix at 1.05% with a £1,995 fee.
