by Mark Johnston
Abbey’s 1.99% Fixed Mortgage Deal.
Abbey has launched a market leading two year fixed rate mortgage with a fee of 1.99 per cent, however it is only available for seven days, starting on Friday 23rd November.
The mortgage has the lowest interest rate in the fixed rate market, but there is a fee of £1,494 which means it might not be suitable for some borrowers. Also this deal is only available through an intermediary, which means borrowers will need to go through a broker.
The loan-to-value (LTV) rate also needs to be considered. Mortgage experts havesuggested that it is a mortgage which will suit borrowers already on the property market, rather than first-time-buyers (FTBs), as it requires a 40 per cent deposit.
Therefore experts warned that before rushing to apply for these deals, it is worth noting that while it might be the lowest fixed rate mortgage on the market, it is not necessarily the cheapest.
When you factor in the fee and work out the total cost of the mortgage over the two year fixed term, there’s a better option for anyone borrowing less than £221,400. However, high fees can be worth paying. The bigger the mortgage, the less of an impact the fee has
Miguel Sard, managing director of Abbey for Intermediaries, said: “With a fantastic rate of 1.99 per cent and available to both homebuyers and re-mortgagers up to 60 per cent loan to value, we expect this great rate to be snapped up within the next seven days.”
The move means Abbey is the first lender return to the sub-2 per cent space since the withdrawal of Tesco’s 1.99 per cent fix earlier in the month.
Tesco Bank recently pulled its 1.99 per cent two year fixed rate less than a month after it was launched. A Tesco Bank spokesman explained that “due to an extremely positive response unfortunately all the funds allocated for the 1.99 per cent deal have now been used up.”
Trinity Financial head of communications, marketing and products Aaron Strutt says: “It is nearly a month it has been available for and it has done quite well to make it that long. It means that the gap between the best rates for direct business has shortened.
Tesco customers waiting to hear about applications have been sent text messages advising them the deal has been withdrawn “due to high demand” but that if their applications are successful they will still get the mortgage rate they applied for.
Although, Tesco bank does continue to offer a highly competitive range of mortgage products with great rates that start at 2.39 per cent for a two year fixed rate product.
The closest deal to abbey’s comes from NatWest at 2.29 per cent, which has an even larger fee of £1,995. First Direct has a deal at the same rate with a 65 per loan to value (LTV) and the same fee of £1,995.
Some mortgage experts have warned that for those customers who, having been lured in by this undoubtedly attractive low rate, could be in line for a nasty payment shock when they come to the end of their two year fixed term.
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