Is Chelsea Building Society's 0.98% mortgage really that cheap?

Chelsea's new tracker mortgage has an ultra-cheap rate, but what about fees?
Chelsea Building Society has launched a tracker mortgage with an initial two-year interest rate of just 0.98%.
The market-leading rate is available to those with a 35% deposit or equity in their home, borrowing between £25,001 and £5 million.
The deal is open to first-time buyers, home movers and those looking to remortgage and carries a product fee of £1,545.
How the deal compares
Chelsea’s sub-1% mortgage is the lowest rate available on the market right now.
On a £150,000 mortgage taken out over 25 years, a borrower would repay just £564 a month during the two-year term.
However, you’ll need to stump up a hefty fee of £1,545 if you want to go for the deal.
As a result, other deals at the same 65% loan-to-value may work out cheaper. For example, both Norwich and Peterborough Building Society and Yorkshire Building Society offer a two-year tracker at 1.09% with a £845 fee.
Even though you’ll have to pay an extra £8 a month over the two year deal compared to Chelsea’s offer you’ll save having to hand over £700 in fees up front, meaning a saving of more than £500 over those first two years.
The trouble with a tracker
Going for any variable rate mortgage is always a bit of a gamble, because what you pay each month can change.
Chelsea’s deal tracks at 0.48% above the Bank of England Base Rate, which is currently 0.5%.
Should the Bank of England decide to move the Base Rate up your mortgage repayments will follow suit. Bear in mind that if rates do rise and you need to leave the deal before the end of the two-year tracker period, you’ll face a 1% early repayment charge on the outstanding loan amount.
If you aren’t prepared to take the risk, the best alternative two-year fixed rate option at a 65% loan-to-value is a rate of 1.07% available from Yorkshire Building Society which comes with a £1,369 product fee. That works out about £8 a month more expensive in £150,000 mortgage example, though the fee is £176 smaller.
[Related story: House price rises helping first-time buyers move up property ladder]
The best tracker mortgages
If you like the sound of a tracker deal here are the lowest two-year rates across a range of loan-to-values.
Lender |
Interest rate |
Maximum loan-to-value |
Product fee |
TSB |
1.29% (tracks Base Rate plus 0.79%) |
60% |
£1,995 |
Chelsea BS |
0.98% (tracks Base Rate plus 0.69%) |
65% |
£1,545 |
Tesco Bank |
1.25% (tracks Base Rate plus 0.75%) |
70% |
£995 |
Post Office |
1.08% (tracks Base Rate plus 0.69%) |
75% |
£995 |
TSB |
1.79% (tracks Base Rate plus 1.29%) |
80% |
£995 |
Tesco Bank |
1.75% (tracks Base Rate plus 1.25%) |
85% |
£995 |
Tesco Bank |
2.6% (tracks Base Rate plus 2.1%) |
90% |
£495 |
Most of the fees on the best two-year tracker deals are fairly high. So we have also picked out the lowest rates on two-year tracker mortgages with fees under £500.
Lender |
Interest rate |
Maximum loan-to-value |
Product fee |
TSB |
1.74% (tracks Base Rate plus 1.24%) |
60% |
£0 |
Barnsley BS |
1.44% (tracks Base Rate plus 0.94%) |
65% |
£345 |
Tesco Bank |
1.75% (tracks Base Rate plus 1.25%) |
70% |
£195 |
Nationwide BS |
1.74% (tracks Base Rate plus 1.24%) |
75% |
£0 |
Leeds BS |
2% (tracks Base Rate plus 1.5%) |
80% |
£499 |
Tesco Bank |
2.25% (tracks Base Rate plus 1.75%) |
85% |
£195 |
Tesco Bank |
2.6% (tracks Base Rate plus 2.1%) |
90% |
£495 |
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