Mortage-signing

The lowest ever mortgage rate has been announced – all you need to know

by Chloe Best

If you're currently house hunting or considering remortgaging, you may have been interested to hear that Britain's lowest ever mortgage rate has been launched on Friday, priced at just 0.89% for two years. The deal has been launched by Yorkshire Building Society and offers prospective homeowners the opportunity to borrow money for a two year period on a Standard Variable Rate.

Financial experts have said that the offer represents the lowest mortgage rate since records began in 1988, and it comes just a few weeks after the building society offered a fixed rate mortgage at 0.99%. Considering signing up? Here's everything you need to know about the new mortgage rate…

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Why are rates so low?

James Farrow, Senior Mortgage Manager at Yorkshire Building Society, said: "The cost of funding has fallen in recent weeks and as a financially strong building society with no external shareholders to satisfy we have the ability to pass this on to borrowers."

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What's on offer?

The deal offers a Standard Variable Rate of 0.89% for two years, and is available to people with larger deposits of 35%. It represents a discount of 3.85% for the first two years of Yorkshire Building Society's SVR product.

Mortage-signing

What's the catch?

The deal is only available to people with a deposit of at least 35% and borrowers will have to pay out a product fee of £1,495 to secure the rate. For a lower fee of £995 borrowers can secure a rate of 1.05%. As the mortgage is based on a variable rate it means that borrowers are at risk of having to make higher repayments if the SVR rises throughout their term.

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If you want more certainty you may be better signing up for a fixed-rate mortgage deal where the rate is locked in for the duration of the deal, which is typically for two, five or ten years.

See our latest money features here.