Lowest mortgage at 3% – but there's a catch

Published on Wednesday 14 January 2009 21:58

BANKING giant HSBC has launched a mortgage with a record low rate of below 3 per cent.

The Premier two-year discount deal is priced at 0.95 per cent below the group's standard variable rate (SVR), meaning borrowers will pay 2.99 per cent when the latest interest rate cut comes into effect on 6 February.

The group said it was the lowest mortgage rate it had ever offered, and it is also the first rate offered to new borrowers to dip below 3 per cent since interest rates began to fall.

Financial information group Moneyfacts also believes it is the first ever mainstream mortgage which does not include an initial discount to have a starting rate of below 3 per cent.

But the deal will only be available to people who have a 40 per cent deposit and qualify to be an HSBC Premier customer.

In order to qualify for a Premier account, people need to either have at least 50,000 in savings and investments held with HSBC, or they have to have a 250,000 mortgage with the group and a salary of 75,000.

Ray Boulger, senior technical manager at John Charcol, said: "It is a new level of cherry-picking, but if you qualify, it is good value." He said the only downside was that people may find themselves locked into a two-year deal at a time when interest rates had reached their trough and it was a good time to switch to a fixed-rate mortgage.