HSBC today announced a raft of rate reductions across almost every fixed rate mortgage, including reducing a five-year fixed rate to under 4% for the first time since September 2022.

This revised five-year fixed rate for remortgages comes in at 3.99% for 60% loan to value (i.e a 40% deposit) with a £999 fee.

The last five-year deal to offer a rate below 4% was withdrawn in early October, after the disastrous mini Budget,  which saw fixed rates climb steeply in its wake.

The product is available to homeowners who are remortgaging or switching rates.

The lender has also cut rates for two-, three- and five-year fixed rates up to 85% and 90% LTV for existing customers switching, as well as for those borrowing more.

Two and five-year fixed rates in its first-time buyer, residential home mover and remortgage deals up to 85% and 90% LTV have also been lowered.

The lender has also added more cashback options of £500 or £350 on over 25 mortgages.

The bank said: “This is the third and most significant set of reductions HSBC has made this year and comes as the bank recently increased interest rates on savings accounts for the seventh time in a year.”

More sub-4% deals on the way?

According to a number of mortgage experts, this is unlikely to be the last sub-4% deal we see in the near future.

The L&C Remortgage Tracker has revealed that the pace of rate cuts has accelerated this year. It showed that the average of the top 10 lenders’ lowest two- and five-year fixed rates had dropped by more than 1.2% between November and the end of January. And that shows no sign of slowing despite last week’s base rate rise.

David Hollingworth, associate director at L&C said: “The thought of being able to fix at a rate lower than base rate would have sounded like dreamland in recent months. But despite base rate continuing its upward trajectory fixed rates have been falling and borrowers are now faced with a very different picture.

“Although those coming to the end of a fixed rate taken during the low in rates of recent years, will still be faced with higher payments than they have been used to, it’s a far cry from the prospect of rates at 6% or more.”

Nathan Reilly, director at mortgage fintech firm Twenty7tec, said: “There’s been a recent return in five-year fixed mortgage searches and it’s been consistent across January, so it’s no surprise that lenders are looking to come back into the market.

“With inflationary pressures possibly slightly on the wane, as the Bank of England recently explained, we don’t think it’s the last new five-year fixed product to launch under 4%.”