Cheapest tracker mortgage rate falls to less than 1%

5 June 2015
Chelsea Building Society has launched a two-year tracker mortgage with an interest rate of less than 1% – making it the cheapest home loan on the market. Interest is charged at 0.48% plus the Bank of England base rate, meaning the tracker's rate is currently 0.98% and will remain so until the base rate rises. However, the deal is 'collared' at 0.98%, meaning that if the base rate was to fall, your mortgage rate would not be cut accordingly. After the two-year period, the deal reverts to the lender's standard variable rate, which is 5.45% at the time of writing. The overall cost for comparison is 4.8% APR. It is available to homemovers, buyers and those wanting to remortgage with a 35% equity stake or deposit (65% loan-to-value, or LTV) and comes with a hefty product fee of £1,545. The true cost of a £130,000 mortgage required to buy a £200,000 property over a 25-year term works out at £488.76 a month based on the current interest rate. Over the two-year period, assuming base rate remains the same, you'll repay £13,275.19. A £130 mortgage application processing fee and £90 mortgage redemption fee also apply and there is an early repayment charge of 1% if you exit the deal before 31 July 2017. However, a 0.25 percentage point increase in the base rate would see the monthly repayment rise to £503.59. A 0.5 percentage point increase would take it to £518.70 and a rise of 1 percentage point would see it hit £549.75.Get help finding the best mortgage for you Attention grabberDavid Hollingworth, at mortgage broker London and Country, said: "This deal is clearly designed to snatch the title of the lowest rate on the market from the HSBC two-year discount with a current pay rate of 0.99%, even if it’s by the narrowest of margins."He added: "Many will be better off looking for lower fees and lots of borrowers are interested in longer term fixed-rate deals with five-year rates available at a little over 2% (TSB is 2.09% for loans of £200k plus to 60% LTV, although there is a big fee of £1,995; Natwest is 2.19% to 60% LTV with a £995 fee)."Last month, Chelsea's parent company Yorkshire Building Society, launched the UK's cheapest-ever fixed-rate mortgage at 1.07% over two years, but it comes with one of the most expensive fees on the market. Homebuyers with a 35% deposit and those remortgaging with the same amount of equity are eligible for the deal, which comes with a £1,369 product fee. Only a handful of other lenders charge higher fees on their most competitive fixed-rate deals – including Chelsea Building Society, Norwich & Peterborough and Virgin Money, according to

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