The new rates start from 2.95% and the reductions apply to both fixed rate and tracker mortgages, whether customers are remortgaging or buying a new home.
David McCreadie, managing director of banking at Tesco Bank, said: "We're pleased to offer customers some good news by reducing our rates to as low as 2.95%.
“Today's rate changes once again underline Tesco Bank's commitment to offering highly competitive banking products which meet our customers' needs today and as they continue to bank with us into the future."
Ray Boulger, senior technical director at John Charcol, was not surprised by the cuts.
He said: “It made sense to launch uncompetitive rates so they could test their systems without attracting too much business.
“This decision signifies they are now keen to beef up volumes and in the short term this may work for them.”
David Hollingworth, associate director at London & County, said there is competitive tension in the market so reducing rates was necessity if Tesco wants to be a part of it.
He said: “Improvements by one player undoubtedly result in improvements across the market as lenders try to get on a level footing.
“From the consumer’s point of view if lenders start to fight it out and rates come down – all the better.”
Hollingworth played down any impact on brokers who offer more than just low rates.
He added: “Although customers want cheap mortgages they need guidance with applications and criteria which they won’t get with this product.”
Tesco Bank rewards customers' loyalty with Clubcard points as they repay their mortgage. Tesco Clubcard holders will collect one point for every £4 on their monthly mortgage repayments.
The Tesco Bank mortgage product range includes two, three and five-year fixed rate mortgages, and a two-year base rate tracker.
