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HSBC offers record low 0.99% two-year fix mortgage rate

HSBC has broken the 1% interest rate barrier by launching the lowest ever fixed rate at 0.99% for two years available for purchase and remortgage borrowers.

The product offered at up to 65% loan-to-value (LTV) comes with a £1,499 fee and an overpayment facility allowing repayments worth up to 10% of the capital penalty-free.

The maximum loan cap is £500,000.

Moneyfacts confirmed the 0.99% fix was the lowest rate offered since it began recording product trends.

The deals are available direct and through its restricted broker panel which includes Countrywide, London & Country, Springtide Capital, Alexander Hall and SPF Private Clients.

Yorkshire Building Society and HSBC both launched headline grabbing low rates at the end of last month with two-year fixed mortgages, priced at 1.16% and 1.14% respectively.

Tracie Pearce, HSBC’s head of mortgages in the UK, said: ‘”We are constantly looking at ways in which we can deliver value to our mortgage customers and from time to time we have the opportunity to launch a rate with a difference.”

HSBC may be the only lender so far to continue its trajectory down the interest rate curve but it is not alone in offering borrowers historically low mortgage deals.

Figures released by property services firm LMS, showed that 56% of remortgagors took advantage of improved interest rates in May, while a third were able to reduce their monthly outgoings by up to £500, by switching deals.

Expert verdict:

Andrew Hagger of Moneycomms warned borrowers interested in the new HSBC rate to pay close attention to the terms and conditions.

“It’s not until you read the small print that you realise there’s also a fee of £1,499 to pay for this mortgage – on a product that only lasts two years – so in effect that’s an extra £62.46 per month on top of your mortgage payment.

“Whether this deal is as good as it looks will depend on the size of your mortgage – if you’re borrowing £220,000 or more then it makes financial sense but for smaller sums there are cheaper alternatives.”

For those who only need £150,000, for example, Hagger suggests the 2 year fix from Norwich and Peterborough Building Society at 1.49%, which has with a much smaller £195 fee. Over the course of 2 years it works out £464 cheaper than the HSBC 0.99% offer, a saving equivalent to £19.33 per month.

“It just emphasises the need to take the headline deals with a pinch of salt and to ensure that any comparison is based on the total cost and not the interest rate in isolation,” Hagger said.

“Always get an independent mortgage adviser to crunch the numbers on your behalf – that way you won’t be caught out out by the marketing hype and pay more than you need to for your home loan.”


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