The HSBC deal is the FIRST time a fixed rate mortgage has ever been offered at below 1%.
What’s the latest?
Fixed rate mortgages have dipped BELOW 1% for the first time as the home loan war intensifies.
HSBC is offering a two-year fixed rate deal at a record low of just 0.99%.
The move is expected to spark a new price war, with other banks and building societies also slashing their rates as they compete for customers.
While HSBC is the only lender offering a fixed rate loan at below 1%, a smattering of lenders have deals of less than 2%, including for borrowers with small deposits.
Why is this happening?
The latest dip in mortgage rates is likely to have been driven at least in part by Thursday’s referendum.
Bank of England Governor Mark Carney recently indicated that interest rates may stay at its current rate of 0.5% for longer than previously expected, while he warned it could be cut to a new record low if the UK votes to leave the European Union.
Another side effect of the uncertainty caused by the referendum is that it has given banks access to cheaper funds, as investors look for safe havens for their money.
Finally, competition among banks and building societies remains intense, so savings are being passed on to consumers.
Who does it affect?
It will come as no surprise that the record-breaking rate is not available to all borrowers.
Instead, people who want it will have to put down a 35% deposit and pay a £1,499 fee.
It is also only available on mortgages up to £500,000.
Commentators have warned that people wanting to take advantage of the deal should move fast, as HSBC is likely to have only limited funds available to lend at this rate.
Sounds interesting. What’s the background?
The HSBC deal is the first time a fixed rate mortgage has ever been offered at below 1%.
It also equals the previous record lowest mortgage deal, which was a discount (variable) rate of 0.99%, also offered by HSBC.
Repayments on the 0.99% rate for a £150,000 mortgage would be just £567 a month, compared with £685 for someone with the average two-year fixed rate of 2.58%.
But homeowners should remember to factor in the cost of the fee when working out if the deal is worth switching to, as those with smaller mortgages may be better off opting for a more expensive deal with a lower arrangement charge.
For example, Nationwide Building Society has a rate of 1.89% fixed for two years, with no arrangement fees at all.
Top 3 takeaways
- Fixed rate mortgages have dipped below 1% for the first time as the home loan war intensifies.
- HSBC is offering a two-year fixed rate deal at a record low of just 0.99%.
- The move is expected to spark a new price war, with other banks and building societies also slashing their rates as they compete for customers.