Leeds Building Society has launched a new range of discount variable rate mortgages starting from 0.99%.
For borrowers with a deposit of 35%, Leeds is offering a two-year deal with a 4.70% discount off the standard variable rate (SVR) of 5.69%, giving an initial rate of 0.99%. This mortgage comes with a £1,999 fee.
- Mortgage fees hit a five-year high as lenders lure in customers with cheap rates and sting them with extra costs
Fee free mortgages include a 1.47% two-year discount mortgage up to 65% loan-to-value (LTV) and 1.79% two-year discount mortgage up to 85% LTV.
Nick Morrey, product technical manager at mortgage broker John Charcol, says: “The headline rate of 0.99% discounted for two years with a £1,999 fee is one of the lowest rates available today. However, with that fee it is only likely to be suitable for loans over about £150,000.”
He adds: “In comparison, Monmouthshire Building Society has the same rate but their maximum loan size is only £500,000 with a £150 booking fee. If you are looking for a fixed rate the next best offering is with Skipton at 1.38% with a £1,995 fee.”
Matt Bartle, Leeds Building Society’s head of product and pricing, says: “Fixed rate remains the most popular type of mortgage by some margin, both among our customers and in the UK generally, 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.”
Should you take out a variable rate mortgage?
If you think the Bank of England’s base rate is likely to stay the same or fall then a variable rate could be for you. However, be aware that rates could rise at any time and leave you out of pocket.
While fixed rate mortgages tend to be more expensive, they can provide you with security against a rate rise.
By fixing you can keep your repayments the same so that any future rate changes won’t catch you off-guard.
The Bank of England has raised interest rates twice in the past 12 months, going up to 0.75% in August.
- House price growth hits five-year low as the squeeze on household budgets and Brexit uncertainty continue to bite
It has hinted that it could raise interest rates if the UK manages a smooth exit from the European Union.
While the Bank did not change rates this month, its latest forecasts suggest rates could rise to 1.5% over the next three years.
Mr Morrey says: “Consumers will have to take a bit of a gamble that the Bank Of England is not going to be able to increase rates as far or a quickly as they might want.”
He adds: “That may well come down to the outcome of the Brexit negotiations as that will affect consumer and economic confidence.
“There is a feeling that if Brexit effects are bad enough on the economy then the Bank will drop rates again. So if a consumer feels that rates are unlikely to increase twice in the next two years, this kind of product would be really good value.”