HSBC debuts ultra-low rate on home loan
HSBC has waded further into the mortgage market by offering a new deal at 1.99 per cent for borrowers who can stump up a 40 per cent deposit.
The rate, the lowest ever for a home purchase or remortgage and a substantial discount on the bank’s standard variable rate (SVR) of 3.94 per cent, will last for two years, reverting to SVR after that.
Analysts speculated yesterday that HSBC’s move could spark a price war among lenders, to the benefit of would-be homebuyers.
Andrew Hagger, of Moneynet.co.uk said: “It’s an aggressive move from HSBC and may shake up what has become a rather stagnant mortgage market – we’ll be watching closely to see how other lenders respond.”
But he warned that 40 per cent was high for a deposit and pointed out that the booking fee of £1199 on such a short-term deal would add around £50 a month to a homeowner’s mortgage bill.
Applicants will also need to demonstrate an impeccable credit history to be eligible for the deal, while the rate will track the bank’s SVR, meaning that it could rise.
The bank’s head of mortgages, Martijn van der Heijden, said: “Across the market lenders’ standard variable rates are at an all time low, as a result we are launching our lowest ever mortgage rate – 1.99 per cent – to appeal to remortgaging homeowners.”
The move chimes with HSBC’s promise to double its 2007 level of mortgage lending and the bank has already set aside £15bn for home loans.
Cheltenham & Gloucester, owned by Lloyds, and the Woolwich, owned by Barclays, both followed HSBC yesterday by announcing plans to cut rates and launch new, cheaper mortgage products.
The number of mortgage deals on offer in the UK has reached a yearly high of 1,676.
But figures from the financial services comparison website moneyfacts.co.uk show that more than a quarter of new mortgages now require a deposit of 40 per cent, compared to just seven per cent of mortgages last year.