Skipton Building Society has unveiled its first fixed rate mortgage below 1%, ramping up the competition between lenders.
The two-year fixed rate mortgage has an interest rate of 0.99%. It comes with a fee of £1,995 and is available for borrowers with a 40% deposit or more.
It comes in the wake of similar products with 0.99% rates from Yorkshire Building Society and HSBC.
Skipton is also offering lower rates across its two and five-year residential fixed range by up to 0.29%.
Kris Brewster, Skipton’s head of products, said: “This is certainly an historic moment for Skipton Building Society, the first time we have offered fixed mortgages below 1%.
“Skipton’s clear message continues to be that we want to offer new and existing customers the most competitive rates and the best levels of service to enable them to complete their purchase or remortgage in the quickest possible timescale.”
However, despite record busting rates looking good on paper, it is always wise to take a look at the fees before you take the plunge.
While a higher fee might work for a borrower with a bigger mortgage, you might be better off getting a slightly higher rate with a lower fee.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The new deal from Skipton BS will turn heads because it offers a sub-1% mortgage rate, and at 0.99% it’s the joint lowest fixed rate on the market.
“Those customers looking to remortgage will find an incentive package of free valuation and free legal fees, whereas homebuyers will just get a free valuation.
“This incentive will be attractive to those customers to reduce the upfront cost of their mortgage, however, with a £1,995 produce fee borrowers must work out the overall true cost.
“The deal allows borrowers to make overpayments of up to 10% of the outstanding balance, and with such a low mortgage rate it would be worthwhile for borrowers to consider overpaying where they can.
“Borrowers will need 40% equity or deposit to take advantage of this deal, which is the same required on the Yorkshire Building Society deal priced at 0.99%, but it carries a lower product fee £1,495. However, unlike Skipton BS, the deal does not offer free valuation or free legal fees.”
Only a few months ago it looked as if the era of record low rates could be over, but recent cuts by a number of lenders suggests competition in the mortgage market is heating up again.
Since the financial crisis in 2008 mortgage rates have steadily fallen.
The Bank of England cut interest rates in August from 0.50% to 0.25% – the lowest on record and the first interest rate cut since 2009 when the financial crisis was at its peak. This led to a number of lenders cutting their rates.
Steven Boyde, associate director at mortgage broker Enness Mortgages, said: “With mortgages costing less than ever, and competition among lenders rife, it’s important to know that most borrowers won’t actually have access to these ‘market leading rates’.
“Rates as low as 0.99% are only accessible to borrowers with the most vanilla or straightforward cases, healthy deposits, copious amounts of equity and bog standard income streams. For example, a self-employed person will struggle to prove affordability due to a short period of accounts, or a doctor will struggle as their income is paid from multiple sources so a steady income stream is difficult to evidence.
“These borrowers can more than afford to service a mortgage, but they will have to pay a higher rate simply because they have slightly complex circumstances. Once you have sifted through the very best rates at the top of the pricing charts, it is then a case of finding the cheapest product or lender specific to the actual client’s situation.
“The checks inflicted upon borrowers now mean that even the wealthiest clients are limited in their property financing options, and all this hyperbole about the cheapest ever rates is alienating them from the mainstream market even further.”
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