HSBC launches first sub-2% five-year fixed mortgage

http://www.theguardian.com/money/2015/apr/18/hsbc-five-year-fixed-mortgage

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One of the country’s biggest lenders has launched the latest salvo in what could become a new mortgage price war by releasing the first ever five-year fixed-rate home loan with an interest rate below 2%.

From Monday, HSBC will be offering borrowers a 1.99% rate fixed for five years – the lowest ever rate on a mortgage over that period.

However, it will only be available for those able to stump up a deposit of 40% of the purchase price of the property, or who have the equivalent equity in their home, and it comes with a £1,499 fee.

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“HSBC has broken quite a significant boundary by launching a rate below 2%,” said David Hollingworth of mortgage brokers London & Country. “It looks exceptional value and shows just how hard lenders are prepared to fight for new business.”

HSBC already has the lowest rate in the increasingly popular five-year fixed-rate mortgage market, at 2.19%. This will be replaced by the new rate, which will cost £15 a month less for someone with a £150,000 25-year loan.

Other lenders will come under pressure to cut rates as the next cheapest comparable deal, from the Co-op, is significantly higher at 2.24%.

“The five-year deals have been hotting up for some time and I think this will push other lenders to respond, which is good news for borrowers,” said Daniel Bailey, a mortgage specialist at Middleton Finance.

However, not everyone who meets the initial criteria will get a loan through the bank, with some commentators suggesting that HSBC is more likely than some other lenders to turn down applications.

“I’ve had a lot of clients unable to get HSBC deals,” Bailey said. “One was recently turned down because HSBC could not see evidence of their weekly grocery spend on their current account statement. That’s because the borrower always paid their Tesco bill using their credit card, but the bank turned them down anyway.”

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Andrew Montlake of mortgage broker Coreco said: “The headline rate is extraordinary, but there will be a lot of people who won’t get this as HSBC is not the easiest lender to get through.”

The banking giant is not the only lender to announce cuts to its rates. In the last week Nationwide, Halifax, Lloyds and Tesco have all reduced rates on a number of different loans. This comes after a short period of rate rises earlier last month as some lenders, including Nationwide, pulled some of the best-buy mortgages as swap rates started to increase.

“While rate cuts are welcome, the problem is that they still only benefit the same people,” Montlake said. “There are thousands of people including the self-employed, contract workers and older borrowers who can no longer get a loan because mortgage lenders have tightened their criteria more than they need to. Those are the people who now need some good news.”