HSBC launches 3.99% fixed-rate mortgage

Mortgage rates have remained elevated since the mini-Budget, but could this latest offering from HSBC be a sign of lower rates to come?

HSBC bank
(Image credit: © Getty Images)

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.

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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.

Nicole García Mérida

Nic studied for a BA in journalism at Cardiff University, and has an MA in magazine journalism from City University. She joined MoneyWeek in 2019.