Mortgage rates continued to hit record highs as HSBC launched its first agreement below 1% in more than five years.
The lender cut the rate on its two-year fixed product for those with deposits or equity of at least 40 percent from 0.05 percent, bringing it down to 0.99 percent.
Although borrowers will have to pay a fee of £ 999 to access it, this represents a floor rate for the bank – the The last time HSBC had such a low rate was in 2016.
How far can the rates go? Those with a lot of equity can now remortgage at very low interest rates
It follows Platform, the intermediary lending arm of the Co-operative Bank, which cut the rate on its deposit product from 40% to just 0.95% earlier this week – the lowest mortgage rate currently available. on the market.
HSBC’s rate cut was one of its 21 mortgage products. The most dramatic reduction has been on his 5 percent deposit mortgage under the government’s mortgage guarantee program.
Interest rates on this product have been reduced by 0.2%, bringing the rate down to 3.79% with a charge of £ 999 or 3.99% free of charge.
HSBC has also reintroduced a three-year fixed rate option, for buyers wanting a midpoint between the most common two- and five-year rates.
Those with 40% deposits or equity can get a three-year fixed rate of 1.14% with a fee of £ 999, 0.15% less than when the three-year fixes were last available. times with HSBC in July 2020.
However, the lowest mortgage rates are reserved for those with a lot of equity in their home, and some are limited to re-mortgages rather than purchases.
Mark Harris, Managing Director of mortgage broker SPF Private Clients, said: “There are a number of less than 1% products currently available on the market, with HSBC being the latest lender to be launched.
“However, only homebuyers with high equity capital and mortgage lenders can access these offers. “
Inexpensive borrowing: HSBC has cut its mortgage rates several times, especially on 95% transactions
That said, mortgage rates are falling across all loan-to-value brackets as activity in the housing market remains intense and lenders compete for borrowers’ clientele.
“The competitive nature of the loan market is such that we are seeing rate cuts across the entire loan-to-value spectrum, so even those with smaller deposits and home equity are benefiting.” Harris added.
This is due to factors such as the government stamp duty holiday, although it ends on June 30, and people’s desire for lifestyle changes and relocations during the pandemic.
Earlier this week, it was announced that inflation has risen over the past year beyond expectations. If this trend continues, mortgage rates may not be able to stay that low for that long, so now might be a good time to consider fixing them.
Will Rhind, Head of Mortgage Advice at Habito, said: “Inflation rose 2.1% in the 12 months ending May 2021, up from 1.5% in April – just over the Bank of England’s 2% target.
“Many economists believe that if this trend continues, interest rates will have to rise in the future.
“With rates currently at historically low levels, this is a great reason to consider setting your rate longer. ”
Those looking for a super low rate have several options
For those who are fortunate enough to have a lot of equity in their home and be able to access the lowest rates, there are now several options with extremely low interest rates.
The lowest two-year patch is offered by Platform at 0.95%, with a fee of £ 1,499 – although the lender is also offering a cash back of £ 250.
The Cumberland offers the lowest rate at 0.98%, although it also charges the highest fee at £ 1,999.
|Lender||Mortgage type||Rate||Available for purchase?||LTV minimale||Fresh|
|Platform*||Two-year correction||0,95%||Yes||60%||1 499 £|
|Le Cumberland||Two-year correction||0,98%||Non||60%||1 999 £|
|At national scale*||Two-year correction||0,99%||Yes||60%||1 499 £|
|BST||Two-year correction||0,99%||Non||60%||1 495 £|
|HSBC||Two-year correction||0,99%||Yes||60%||999 £|
|Santander||Two-year correction||0,99%||Non||60%||1 249 £|
|Hinckley & Rugby BS||Two-year discount||0,99%||Yes||60%||998 £|
|Leek BS ***||Two-year discount||0,99%||Yes||75%||1 495 £|
|* Minimum loan amount £ 275,000 ** Only available for certain mortgage networks *** Minimum loan amount £ 200,000. Source: It’s Money and Defaqto.|
Nationwide, TSB, Santander, and HSBC all offer two-year fixes with interest rates of 0.99%.
If you are looking for the security of a longer solution, you will have to pay a higher rate as there are currently no lenders offering five-year agreements below 1 percent interest.
There are also two low rate mortgages available at rates below 1%, from Hinckley & Rugby Building Society and Leek Building Society.
A discount rate mortgage will follow the movements of a lender’s standard variable rate, which is the default rate they charge borrowers who have reached the end of fixed-term agreements.
So, in the example of the Hinckley & Rugby deal, your mortgage rate would be reduced by 4.90% against the construction company’s SVR for 2 years.
Since the SVR is currently 5.89%, your initial mortgage rate would be 0.99%, but that could change at any time.
Borrowers who opt for a discount need to be confident that they can cope with increases in their monthly payments.
Buyers urged to compare rates against fees
These super low interest rate offers may sound like a lot of money, but they’re not always the best value.
This is because when you add the amount of the fees to your monthly payments, you may find that they would have been lower if you had taken out a mortgage at a higher interest rate with no fees. It depends on the amount of your mortgage.
Katie Brain, Mortgage Expert at Defaqto, said: “While these rates seem incredibly low, the fees need to be factored into the loan amount.
“Since these are two-year fixed rates, it would only be worth paying the high fees if you have a mortgage of £ 190,000 or more. ‘
Brain added that, based on a loan of £ 150,000 for a mortgage with a 40% deposit, the two-year fixed agreement with the lowest overall cost is none of those 0 rates. , 99%. Instead, it’s HSBC’s 1.24% no-charge rate.
Remortgage fees have risen 5% in the past year, Brain said, to an average of £ 1,127.
It is also worth considering how often you will have to pay fees.
If you take a two-year fix, for example, you’ll have to pay again in 24 months.
Rhind said: “It should also be borne in mind that the products with the lowest rates are usually the shortest solutions on the market (2-3 years), but, because of this, you will pay a fee. of product each time you remortgage.
“So if you go for a 2-year solution each time, you’re also going to pay this fee potentially 14 times over a 30-year term, costing around £ 14,000 in fees alone.
‘Compare those fees to taking out a 5-year or 10-year mortgage each time, so yes, the rate may be higher, but you’ll only pay the fees six or three times over the life of the loan, not 14 times – so it’s worth figuring out how that might impact your savings by taking the lower rate from the shorter fix. ‘
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