Competition to offer mortgage rates below 1% has intensified as a building society launched a market-leading deal.
Yorkshire Building Society said the two-year tracker rate of 0.78% is available to borrowers with a 35% deposit, and has a £995 fee and free standard valuation.
The mutual has also introduced several other trackers, including a 0.89% tracker rate offered to home buyers or those re-mortgaging with a 25% deposit, which also comes with a £995 fee and free standard valuation.
For borrowers with smaller deposits, a two-year rate of 2.59% is available for those with a 5% deposit.
Tracker mortgages are variable rate deals which tend to track the Bank of England base rate above a certain margin. This means that the interest charged on a mortgage depends on how the base rate changes.
If the base rate falls, the interest rate charged will also fall but if the base rate rises, the interest rate will also increase.
The Yorkshire’s new 0.78% deal is made up of the Bank of England base rate, which is currently 0.10%, plus 0.68 percentage points added on top.
Ben Merritt, senior mortgage manager at Yorkshire Building Society, said: “In a really competitive mortgage market, we’re pleased to be able to offer our lowest ever mortgage rate to give borrowers more choice.
“The recent increased availability of tracker mortgages, including the introduction of our first tracker mortgage for some years, expands the number of options available to borrowers who, in a low rate environment, may wish to take advantage of lower monthly payments.
“As with any variable mortgage that tracks the Bank’s base rate, it’s important to make sure any increase in monthly payments could be afforded, should the base rate rise.”
Borrowers who choose to leave any of the Yorkshire’s tracker mortgages during the initial two-year term will face early repayment charges of 1%.
Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “At 0.78%, the two-year base-rate tracker deal at 65% LTV (loan-to-value) provides a market-leading initial rate, alongside a reasonable fee and a free valuation incentive, and is a welcome addition to an already bustling sector.”
She added: “Borrowers considering securing a new mortgage should ensure that they compare the different options available and ensure that they think about the overall, true cost of the whole package a deal offers by balancing the initial rate against any outgoings they might incur such as associated fees, and also considering whether they prefer a variable or a fixed mortgage rate.
“Having the support of a qualified adviser could be invaluable in calculating what is the best choice for their circumstances.”