App-based bank Atom is to offer a raft of "stunning" five-year fixed-rate mortgages this week, with the highlight being a record-breaking rate of just 1.29% if you can borrow 60% of your home's value.
The 1.29% deal, which will fix a borrower's mortgage payments until 2022 and comes with a £900 fee, is the lowest ever seen for a five-year fixed mortgage - "by a mile", according to broker London & Country (L&C). The next most competitive five-year deal is Barclays at 1.7%, L&C said.
Atom Bank's five-year fixes will launch on Wednesday 11 April, in the latest escalation of the ongoing mortgage price war. They'll only be available from certain brokers. Atom's website contains a list of mortgage brokers who will be able to advise you on how to sign up to one of the new five-year fixed rates.
Crucially, MoneySavingExpert.com understands it will be a matter of weeks before the best buy five-year offerings are withdrawn - so you'll have to be quick if you're interested.
'Lowest five-year rates we've ever seen'
It's not just the deal at 60% loan-to-value (LTV) - Atom Bank's released a whole series of competitive fixes, including an 80% LTV fix at 1.49% and a 90% LTV at 1.99%, both with a £900 fee.
Pete Gettins, spokesman at L&C, told MoneySavingExpert.com: "The new Atom Bank fixes are the lowest we’ve ever seen, by a mile. The current record five-year low is from Barclays at 1.70%, so at 1.29% this is a huge reduction. Likewise the 90% LTV rate at just 1.99% is stunning.
"Of course it’s important not to get too carried away: you’re still tied in for the full five years of the fixed rate so these deals won’t be suitable for everyone. But if you’re happy where you are and not looking to change anything major in the next five years, these products are going to be incredibly attractive."
Five-year fixes best for those with no plans to move
They're usually for those who have no plans to move in the next five years and want the security of locking in a set, cheap rate for a decent spell.
The risk is that if you exit the deal early – a work move overseas, for example – you can end up paying a nasty penalty of up to 5% of your outstanding mortgage. And while you may be able to port it (ie, move your mortgage to another property), you may have to also pay a higher interest rate on new borrowing.
How can Atom Bank offer these rates?
The bank’s online model means it can keep a lid on many costs, such as branches and customer-facing staff. And Atom Bank says it's also partly able to offer such appealing rates thanks to the money it's generated from recent table-topping savings deals, which pulled in thousands of customers.
Aaron Strutt, product and communications director at broker Trinity Financial, told MoneySavingExpert.com: "They are a serious bank with strong ambitions to increase market share using the digital platform over the coming years. They have been offering some great saving rates and certainly have money to lend.
"As these rates are limited to selected brokers, they will be able to manage demand better than some of the other banks."