Maidenhead, United Kingdom (PressExposure) October 31, 2012 -- Tesco is sparking a price battle by offering the cheapest mortgage in the UK at just 1.99%. It's available fixed for two years, and Tesco ClubCard holders can earn points whilst they pay off their mortgage and includes a free valuation and fees.
This 1.99% deal is only available to those with a 40% deposit, so it's not helping first time buyers to get on the property ladder as they need such a large deposit in order to get a good mortgage deal.
This deal will mean that the typical borrower with a mortgage of £150,000 will be £2,300 better off than if they had a deal at the average 4.44% fixed rate. It is believed that other lenders will try to match this deal triggering a spate of great deals for those with large deposits.
Tesco is in a position to offer this deal due to the Government's Funding for Lending scheme, where it handed out £80bn to Britain's banks.
However, critics have hit out at Tesco saying that they need to introduce deals to help first time buyers and those with small deposits, as this is what will truly kickstart the property industry.
Richard Alton runs Alton Mortgages, a whole or market broker based in Maidenhead. Established in 2005, customer service is at the heart of what they do, and they recognize that their clients are individuals with very unique requirements. He says:
"The fact is IF you qualify for this mortgage it is clearly a cracker, the reality is that a lot of people won't qualify for it but it will hopefully put the other lenders on watch and hopefully give them a kick up the backside and they will react as we have seen recently.
"It is great news that the lending scheme is getting the best rates from banks and the fact we have a new entrant trying to make an impression may get the other banks to react and thus bring prices down for the British Public at a time when we have seen rising bills.
"The main critism of the scheme has been the fact that banks are only targeting households which have 40% or more deposit so the low risk borrowers. The scheme has totally missed the majority of households which have less than 40% deposit. All banks have been guilty of this the issue is if one bank reduces rates in this segment it will get swamped with new business and won't be able to cope.
"It is great Tesco is leading the market but it will be short term is no one lender can afford to dominate the market else their processing would fall down and they would be unable to cope with processing."
Notes to Editors
Alton Mortgages is an established whole of market mortgage broker based in Maidenhead, Berkshire. Established in 2005, customer service is at the heart of what we do, and we recognize that our clients are individuals with very unique requirements. Click here to find why you should use a broker . We work with individuals and families to provide them with an exceptional residential mortgage service. Click here to find out more about Alton Mortgages