HSBC has launched a five year fixed-rate mortgage with a rate of 3.99% – the first product to offer a rate lower than the Bank of England’s base rate since the mini-Budget in September.
Mortgage rates hit a peak of 6.65% in September, and though they have since begun to fall they remain a far cry from the 2% rates we saw at the end of 2021.
The average two-year fixed rate mortgage is currently 5.43% while the average five-year fixed rate deal sits at 5.15%, according to analyst Moneyfacts.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The increased rates are partly due to the Bank of England’s series of rate rises. On 2 February it raised the base rate to 4%, marking its tenth consecutive increase. Increased rates have contributed to the property market’s slowdown.
Indeed, mortgage borrowing fell by £1bn between November and December as buyers questioned whether now was a good time to buy a house.
So, the news of a 3.99% product will be welcome by buyers struggling with higher mortgage repayments on top of rising energy bills and the cost of living crisis.
Here’s what you need to know about HSBC’s latest product.
How does HSBC’s 3.99% fixed mortgage deal work?
HSBC is offering a rate of 3.99% on a five-year fixed rate mortgage. It comes with a fee of £999, and customers will need a 40% deposit.
It’s only available to customers who are remortgaging, meaning first time buyers can’t take advantage of the rate.
The good news is HSBC is likely to be the first of a few providers to offer better rates. Lenders including Santander, Barclays, Halifax, Nationwide and Virgin Money have all made cuts to their mortgage rates as they try to draw buyers back in.
Additionally most lenders have priced in the BoE’s expected rate rises, meaning the rates on their products are unlikely to change much.
There are also some things to consider when fixing your mortgage. Inflation is expected to have peaked, and the base rate isn’t expected to climb above 4.5%. This could see mortgage rates drop further, resulting in better deals down the line.
It’s why some homeowners are opting for tracker mortgages instead. These products track the base-rate, and because they are not fixed offer the opportunity to switch whenever a more appealing product comes out.
But uncertainty around property prices and mortgage rates looks set to remain, especially as the cost of living crisis continues to impact household budgets, so it’s important to consider your individual circumstances before making any decisions.
-
What will the unravelling of US-China trade mean for the economy?What will a US-China decoupling mean for the global economy?
-
Scottish Mortgage: why we’re turning to private companies and China for exceptional returnsWhen it comes to delivering growth, Scottish Mortgage will stop at no end in its hunt for exceptional long-term returns - this includes China, unicorn companies and sectors such as space exploration
-
Mortgage deals pulled: average two-year fixed rates surge to highest level in 15 yearsNews The choice of mortgage products has fallen since 24 May - and rates for fixed deals have risen.
-
London households face a mortgage hike of £7,300 a yearNews Around 3.5 million households are yet to feel the impact of rising mortgage rates because they are still on cheap fixes or variable rate deals
-
Skipton launches a 100% mortgage – how does it compareNews Skipton Building Society has launched the UK's first 100% loan-to-value mortgage exclusively available to renters. Similar deals are already available from a number of lenders, but all require some type of help and guarantee from family.
-
Mortgage borrowing falls by £1bn as property market slowdown continuesNews Data from the Bank of England reveals mortgage borrowing fell from £4.3bn in November to £3.2bn in December. We look at why the housing market is slowing down, and what you can do if you’re worried about your mortgage
-
Over 1.4m households face mortgage rate hike in 2023News As fixed rate deals come to an end, 1.4 million households will pay significantly more later this year - what does this mean for you?
-
Government extends mortgage guarantee scheme to help first-time buyersNews The mortgage guarantee scheme helps those with 5% deposits secure high loan-to-value mortgages.
-
Millions of homeowners face £250 jump in monthly mortgage payments next yearNews The Bank of England has warned that homeowners and buy-to-let investors will need to pay thousands of pounds in extra mortgage payments next year. We explain what help is available if you’re worried about rising mortgage costs.
-
Mortgage early repayment charges: are they worth the cost?Analysis With interest rates set to rise further in the months ahead, is it worth swallowing early repayment charges to refinance your mortgage today?
