First Direct bank has launched a new tracker mortgage, reportedly the cheapest on the market, in an attempt to lure borrowers away from their existing mortgage lenders’ standard variable rates (SVR), according to an article in The Telegraph. This new deal tracks the Bank of England base rate as just 1.49% above for a period of two years, meaning the current interest rate would be a mere 1.99%.
The bank is offering to cover the usual remortgaging costs such as legal costs, the cost of a standard valuation and any enquiry fee charged by the borrower’s current lender. There is however, a £999 booking fee, although this can be reduced to only £99 if the borrower agrees to pay 1.69% above the base rate instead of 1.49%.
The mortgage deal is aimed at those who do have equity in their home already. Some mortgage advisors believe that many borrowers looking to remortgage at the moment will seek the security of a fixed rate mortgage. Inflation is currently at over 3%, far above its target of 2%, which could lead the Bank of England to review the record low of 0.5% sooner rather than later.
The Bank of England’s Monetary Policy Committee has apparently been split since October in its discussions on how to tackle the matter of inflation and although to date this has meant a standstill, it has been said that the committee is poised to make a move in 2011.