The Chelsea Building Society is the latest major lender to drop below the 3% mark on a 5 year, fixed term mortgage product. They have effectively revived the mortgage war on sub 3% products with their offer of a 5 year fixed rate mortgage that has rate of 2.99% on a 70% loan to value rate.
In July, the HSBC caused quite a stir by launching the cheapest 5 year fixed rate mortgage ever, By fixing their rate at below 3% they sparked a run of other lenders slashing their prices to get into the race. The problem was that these lenders were all fighting to attract borrowers classed as low risk and who could afford to buy a new home with an LTV of 60%.
These headline grabbing rates quickly disappeared as those who were lucky enough to have the savings that equated to 40% of the value took advantage of the deals. It would now seem that the battle is set to be reignited with the Funding for Lending scheme finally producing cheaper mortgages for those who really need it. The Chelsea is currently the market leader by offering the cheapest 5 year fixed rate mortgage available anywhere.
The rate of 2.99% effectively mean that a loan of £150,000 over 25 years result in the monthly payments for the 5 years term equating to only £710.54.The product fee, however, is slightly less appealing, being a hefty £1495. Out of this, £1300 can be added onto the mortgage, whilst the remaining £195 is payable upon application and is also non refundable.
This is undoubtedly a very bold move from the Chelsea, and it could well encourage other lender to follow suit in order to compete, and ultimately mean that those wishing to get on the property ladder who can’t cover a large deposit could benefit.