The supermarket giant will also offer a three-year fix at 2.29% and a five-year fix at 2.49%. All three products come with a non-refundable booking fee of £195 and product fee of £1,300.
Tesco had also cuts rates on its tracker products with a two-year variable rate reduced to Bank Base Rate +1.45% at 70% LTV. Low fee options are also available from the lender.
Tesco Bank mortgage customers will continue to receive a Clubcard point for each £4 they make in monthly mortgage repayments.
David McCreadie, managing director of banking, said: “The new fixed rate and tracker products we have announced today provide outstanding value to customers.
“We aim to provide customers with a combination of strong rates, competitive fees and the ‘thank you’ of Clubcard points, that puts us in a unique position to meet the needs of Tesco customers.”
Other lenders offering two-year fixes at 1.74% include Chelsea Building Society and NatWest, who also offer the product through Legal & General mortgage advisers.