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.
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.
-
Why you should start investing earlyMost investors wish they had started earlier, and data shows that starting to invest sooner yields greater results over time
-
Rail fares could spike by 5.8% next year – how to save on train travelJuly’s RPI inflation reading tends to determine rail fare hikes in the following year. We look at how much your train tickets could cost, and how to save money
-
Barclays to pay millions in compensation after IT outage chaosBarclays intends to compensate customers after an IT outage caused payment problems for three days
-
Barclays reports large spike in romance scams - here's how to avoid themThe UK bank found a 139% increase in the total value of romance scams
-
Nationwide, HSBC, Barclays and Virgin Money customers hit by payment issuesThe problems have been compounded as Friday is the last day of the month when many people are paid by their employer
-
Bank of England holds interest rates at 5.25% againInterest rates have been frozen at 5.25% for seven meetings in a row. Here is what it means for your money. Plus, when will interest rates finally be cut?
-
Bank of England holds interest rates at 16-year highNews Interest rates have been frozen at 5.25% for the sixth consecutive monetary policy meeting. Here is what it means for your money.
-
Barclays bank caps in-branch cash deposits for personal banking customersNews Barclays said the new cash deposit limit was part of a bid to clamp down on financial crimes, like money laundering. But will it affect you?
-
Barclays warns of significant rise in social media investment scamsInvestment scam victims are losing an average £14k, with 61% of those falling for one over social media. Here's how to spot one and keep your money safe
-
Interest rates remain frozen - when will the Bank of England cut the cost of borrowing?News The Bank of England has held interest rates for the fifth consecutive monetary policy meeting. Here is what it means for your money.
