Could this be the return of the mortgage price war? Leeds Building Society has announced discounted variable rates on two-year mortgages which take rates as low as 0.99%.
For homeowners who just want to find the lowest monthly repayments possible, and are less focused on the certainty of a fixed rate or putting down the smallest deposit, this is good news.
A discount of 4.7% off Leeds’ standard variable rate (SVR) mortgage (currently at 5.69%) gives an initial repayment rate of 0.99% – for borrowers putting down a 35% deposit and paying a set-up fee of £1,999.
Or borrowers can now pay 1.47%, with no fees.
Or 1.79% with no up-front fees if you have only a 15% deposit.
After the end of the two-year term, each option offers a 1% discount off that standard variable rate for another three years.
Who does this kind of deal suit?
“Fixed rate remains the most popular type of mortgage by some margin, both among our customers and in the UK generally,” says Matt Bartle, head of product and pricing at Leeds Building Society.
“But there’s a trade-off. The interest rate and monthly repayments may be a little higher than if the borrower had chosen a variable rate. But they have the security of fixed repayments which can help them to budget.
“However, borrowers who aren’t expecting rate increases in the near future could choose a variable rate product with lower repayments – which is why we’re introducing these shorter-term discount mortgages.”
Interest rate are now rising slowly, across the board, but Matt Bartle says “the indication is that Base Rate increases will continue to be small and gradual, in recognition that rates have been at historically low levels for the past decade.”