Tesco launches 1.99% mortgage deal

TescoCompetition in the mortgage market has increased further as Tesco Bank slashed its rates and launched a deal at below 2%.

Its new range includes a market-leading two-year fixed-rate mortgage at 1.99%, down from 2.64% previously, although borrowers need a hefty 40% deposit to take out the deal.
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Tesco has also dropped the rate on another a two-year fix from 2.79% to 2.39% for borrowers with a 30% deposit and said it was able to make the rate cuts due to its plans to use a government scheme to kick-start lending by offering banks access to cheap funding.

Both the Tesco deals also carry fees of £995 and are available to customers who are remortgaging or buying a new home.
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Rachel Springall, spokeswoman for comparison website Moneyfacts, said the last time a similar fixed deal was offered at 1.99% was around a year ago.

She said: "It's great to see Tesco Bank offering some attractive rates, especially breaking the 2% barrier.

"The new two-year fixed deal from Tesco Bank will become the market leader at 1.99% with a £995 fee and will require a 40% deposit. In addition the two-year 2.39% deal with a £995 fee will be the lowest rate for 30% deposits.

"Customers will be able to acquire Clubcard points on each monthly repayment, where they can redeem them as vouchers to use in Tesco stores."

The supermarket giant only launched into the mortgage market in August, and offers loans-to-value (LTVs) at up to 80%, alongside a range of banking and insurance products, with plans to launch cash Isas before the next tax year starts.

Benny Higgins, chief executive of Tesco Bank, said: "We are committed to responsible lending and hope to enable our customers to borrow a further £1 billion, over the next year, at affordable rates."

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