Mortgage deals head EVEN LOWER as HSBC launches home loan with a headline rate of just 0.94%
- HSBC is offering a two-year fixed mortgage with interest of just 0.94%
- Only borrowers with 40% deposit or equity can apply and it has a £999 fee
- Rates for first-time buyers and second steppers have also been cut
- Should you switch? We explain the pros and cons and what fees to look out for
HSBC has launched a mortgage with its lowest-ever headline interest rate of 0.94 per cent.
The ultra-low rate on a two-year fixed mortgage beats the previous cheapest rate on the market, which was 0.99 per cent offered by TSB.
However, it is only available to those with equity or deposits of at least 40 per cent of their home’s value – and they will need to pay a £999 arrangement fee.
Of interest? HSBC is offering an ultra-low mortgage rate of 0.94 per cent with a £999 fee
It means that someone buying a £250,000 home with a deposit of £100,000 would pay £4,989 per year.
For those who don’t want to pay a fee, HSBC also has the best-buy fee-free deal at 1.14 per cent for a two-year fix.
This has a lower annual cost of £4,599, which highlights the importance of comparing rates and fees.
Several lenders have offered 0.99 per cent rates in recent months in a bid to attract customers and take advantage of the housing market boom, though some were only available for a limited time.
Jonathan Harris, managing director of broker Forensic Property Finance, said: ‘Lenders have plenty of money to lend and are keen to do so.
‘One way to attract business is to launch ever-lower mortgage rates to top the best buy tables, which is what HSBC has done with this incredibly cheap two-year fix.’
Lenders sometimes attach high fees of up to £1,500 to their cheapest mortgages to compensate for the low interest rate, but Harris described HSBC’s £999 fee as ‘reasonable’.
‘Not only is the rate super low, the fee is also reasonable – it’s not a case here of offering a cheap rate with a hefty fee to compensate,’ he said.
The lowest rates available for those with 40% deposit or equity
Based on a £250,000 home and a buyer with £100,000 deposit or equity, these are the lowest interest rates on the market – though borrowers should also consider the cost of fees, and how often they will need to pay them, to check they’re getting the best deal.
HSBC two-year fix at 0.94 per cent with £999 fee. Annual cost: £4,989
Natwest tracker mortgage, fixed at the base rate +0.88 per cent for two years (currently 0.98 per cent) £745 fee. Annual cost: £4,884*
TSB two-year fix at 0.99 per cent with £995 fee. Annual cost: £5,015
Santander two-year fix at 1 per cent with £749 fee. Annual cost: £4,897
NatWest two-year fix at 1.02 per cent with £995 fee. Annual cost: £5,031
Check the best deals available for your circumstances using the This is Money mortgage service
*Tracker rates move with the Bank of England’s base rate, so what you pay can change even during your fixed period
For those who are coming up to the end of a fixed-term mortgage deal, now could be a good time to switch and lock in a low rate for the next two, or even five, years – as there is no guarantee that interest rates will stay low.
‘It looks as though we are in a low interest rate environment for a while yet, but borrowers should not hesitate if they see a product they like the look of and qualify for it,’ Harris said.
However, he warned that borrowers tempted by this cheaper deal who are still locked in to a fixed period on their existing mortgage should check how much their early repayment charges would be.
>> Compare rates and fees and make sure you get the best deal
Mark Harris, chief executive of broker SPF Private Clients, also sounded a word of warning about being lured in by very cheap interest rates – especially if they had life events down the line that might require them to move.
He said: ‘Borrowers thinking of switching should look at the costs – not just the early repayment charges but the cost of the new deal.
‘Additionally, what are your motivations? Is there an event, for example, a baby, home move or divorce in the short or medium term that may make the decision to switch less clear?’
HSBC has also reduced rates by up to 0.3 per cent on more than 40 other mortgages, including deals for first-time buyers and those seeking a remortgage.
Its two-year fixed rate for those with 15 per cent deposits has been reduced by 0.3 per cent to 1.99 per cent with a £999 fee, or 2.29 per cent with no fee – the lowest since October 2020.
First-time buyers with 10 per cent deposits will be able to access a two-year fix at a 0.3 reduced rate of 2.49 per cent, the lowest since the reintroduction of low-deposit lending in January.
The Mortgage Guarantee Scheme deal for those with just five per cent deposits has seen its rate cut by 0.20 per cent to 3.39 per cent with a £999 fee, and the fee-free deal is now available at 3.59 per cent.
For those seeking longer fixes, the five-year fix for those with 25 per cent deposits has been reduced by 0.20 per cent to 1.29 per cent with a £999 fee, and the five-year fix for those with 10 per cent deposits has been cut by 0.25 per cent to 2.99 per cent, with a £999 fee.