Yorkshire Building Society has touted its two-year fixed rate mortgage at 65 per cent loan-to-value as being better value than the market average, despite a £1,345 fee.
The deal comes with a rate of 1.14 per cent, which would give someone with a £250,000 loan an extra £107 in their pocket each month compared with the average two-year 65 per cent LTV two-year fix, which comes with a rate of 2.02 per cent and a £995 fee.
The building society argued there is only £350 difference between the £1,345 fee attached to the Yorkshire’s mortgage and the average mortgage fee, so by the end of the two-year term, a borrower with a £400,000 mortgage would save a total of £3,730.
Mortgage product manager Brendan Gilligan noted the lender does offer a fee-free option of this mortgage, which comes at a rate of 1.89 per cent, with a choice of free standard valuation and legal fees or cashback incentives.
“Borrowers opting for the 1.14 per cent option would still benefit from a saving of £90 a month for £250,000 loans, or £145 for £400,000 loans, and would have paid off the balance of the £1,345 by 14 months or nine months for the respective loan sizes,” he pointed out.
Lea Karasavvas, managing director at Prolific Mortgage Finance, said Yorkshire remains a pace setter in the rate wars and deals such as these show the market could be heading for sub 1 per cent fixed rate in due course, as lenders try to squeeze market share.
“I am sure this is just the start of what is to come, but hats off to Yorkshire for starting competition in price that will trigger a big win for the borrowers.
“Lender competition is sparking a rate war that will simply drive down the cost of borrowing for those with significant equity in their properties and could create a growth in the remortgage market also.”