Tesco Bank has cut mortgage rates by 0.35% – more than the fall in the Bank of England base rate last week.
The bank said it was lowering the standard variable rate by 0.35% to 3.89% following the Bank Rate cut to “establish new underlying saving interest rates”.
A Tesco Bank spokesperson said: “In recent years, market conditions have resulted in reductions in savings rates and as a consequence of this, and the MPC’s decision, we have taken the decision to set new underlying savings rates.
“We will write to all savings customers with instant access accounts, giving them two months’ notice before any change takes effect. It is important to us that customers are fully informed of the interest rates on their account and trust our decision making. Customers can check their interest rates using online and mobile banking or by contacting us directly.”
Tesco’s Instant Access ISA will drop from 0.75% to 0.50%, while its Internet Saver will fall to 0.40. Its Instant Access Savings Account will pay 0.25%.
Last week, the Bank of England cut interest rates from 0.50% to 0.25% – the lowest on record.
It is the first interest rate cut since 2009, when the financial crisis was at its peak.
The Bank also unveiled a massive stimulus package worth £170 billion to help prevent a downturn in the economy following the Brexit vote. The measures include the purchase of £10 billion of corporate bonds and government bonds of £60 billion.
A number of lenders have already passed on the Bank Rate cut to borrowers, including Santander, Virgin, Co-op, Skipton, NatWest,TSB, Coventry Building Society and Barclays.
Since the start of this year average rates across all fixed mortgage terms have fallen.
The average two-year fix has seen a reduction of 0.24% since January, while the average five-year fix has fallen by 0.19% over the same period. The average 10-year fix has dropped by 0.20% since the start of the year.
The mortgage price war has escalated in recent months following hints by Bank of England Governor Mark Carney that the Bank rate could be cut in the event of a Brexit vote.
Since the financial crisis in 2008 mortgage rates have steadily fallen.
With lenders slashing rates, experts believe there has never been a better time to get a mortgage.
HSBC recently launched a two-year fixed rate mortgage that has an interest rate of 0.99%, the lowest since records began.
Nationwide has cut its fixed rate and tracker mortgages by up to 0.25%, while Halifax has reduced its rates on its first-time buyer mortgage range by 0.30%.
Coventry Building Society has also launched the lowest ever 10-year fix at 2.39%.
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