First Direct offers lowest tracker at 2.58%
First Direct mortgages offer a new lifetime tracker at 2.58% the lowest, for borrowers with big deposits and with no early repayment charges. The borrowers can leave if rates rise substantially.
The mortgage at base rate plus 2.08% comes with a £999 fee and is available for those with at least a 35% deposit. Borrowers who wish to pay a smaller fee, ie. £99 can get a rate of 2.99% (base rate plus 2.49%), while those with a smaller deposit of 25% , will get a rate of 3.24% (base rate plus 2.74%).
This facility allows borrowers to link their savings to the mortgage. Although they do not get any interest in return on their savings, they only pay interest on the balance of mortgage minus savings. If the buyer decides to move, the First Direct mortgages can be taken to new properties.
First Direct offers another great rate for those who have added bonus of an offset facility and the ability to leave at any time without early repayment charges. This is a very important feature, ie., with a rate of 2.58% may seem cheap now, this is base rate plus 2.08%, and when the base rate inevitably rises from its record low of 0.5% this lifetime tracker could get progressively more expensive.
So, if you are looking for a best tracker rate, go to First Direct. It could be another top deal, if it’s available to those with a 25% deposit.
Off-set Mortgage: Through reduced interest charges buyers pay off their capital at a faster rate. There is an advantage of overpaying this traditional mortgage, ie. the money paid into the linked savings account can be accessed if needed and interest charges may rise back up.
When using an offset mortgage or overpaying can be tax efficient, as Savings account interest is taxed at either 20% or 40% approximately and depends on saver’s income threshold. But, in the First Direct tracker at 2.58%, the savings equivalents would be 3.23% at 20% tax, or 4.3% at 40%. For 3.24% tracker the equivalents would be 4.05% and 5.4%, respectively.
