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Is the mortgage war starting?
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Mortgage lenders have been criticised for not reflecting the ultra-low interest rate environment in the rates they’re offering to customers. However, HSBC has launched some new deals including a 1.99% two-year discount – the lowest rate on the market – but is it as good as it sounds?
HSBC has been one of the few lenders actively competing to attract new mortgage customers and it’s great news that the bank is keeping on the pressure with its latest deals. It will hopefully result in lower rates from other lenders too.
What’s on offer?
HSBC’s 1.99% deal is a two-year discount, with a £1,199 arrangement fee. A discount means the rate is linked to the lender’s standard variable mortgage rate (HSBC’s is currently 3.49%), as opposed to the Bank of England base rate which tracker mortgages are linked to. The main implication of this is that theoretically the rate can be changed at HSBC’s discretion, unlike trackers which mirror base rate changes.
cut home costs
Unfortunately not everyone will be eligible for the offer. The penchant for only the lowest-risk borrowers continues: HSBC is only offering the 1.99% deal to those with a deposit of at least 40%, precluding many from taking advantage of the mortgage.
However, the bank does have other deals available to those needing to borrow a higher proportion of the property’s value. There’s the two-year discounted rate of 2.49% for those needing to borrow between 60% and 75%, while a rate of 3.89% is available for loans up to 90%.
If you do qualify for the 1.99% product it is a really competitive deal. That said, the relatively high fee means that some people may be better off opting for a loan with a higher rate but a lower fee. For example, if you’re borrowing less than £70,000 Market Harborough Building Society’s two-year discount at 2.99% will actually work out cheaper than the HSBC deal. This is because the arrangement fee is significantly lower at £245.
