THE battle between lenders to chop down the mortgage rates on offer has intensified, with a company unveiling a new five-year deal with a record low rate of under 2 per cent.
On Monday, HSBC said it will launch a five-year fixed-rate mortgage with a rate of 1.99 per cent. Experts said this is the lowest-rate deal of its type that they have ever seen on the market.
However, borrowers must have a 40 per cent deposit to take out the deal, which also comes with a booking fee of £1,499.
Charlotte Nelson, a spokeswoman for financial information website Moneyfacts, whose records go back to 1988, said: “This 1.99 per cent deal is the first five-year fixed-rate mortgage to be launched below 2 per cent and is the lowest on record that Moneyfacts.co.uk has seen.”
According to Moneyfacts’ records, the average rate on a five-year fixed rate mortgage lenders are offering across all deposit sizes is now 3.55 per cent, having fallen from 4.04 per cent a year ago. Five years ago, the average five-year fix came with a rate of 5.87 per cent.
Ms Nelson continued: “The competition to be the lowest in the mortgage market shows no signs of stopping and is great news for borrowers.
“Moneyfacts.co.uk has seen 15 providers cut rates across their ranges in the past seven days alone. Lenders want to appear in the ‘best buys’ so they are constantly reducing rates to remain competitive.”
Ms Nelson said when looking for a fixed-rate mortgage deal, borrowers need to consider not just the rate but the whole package attached to the mortgage, including any fees, which can add significantly to the overall cost of the home loan.
Experts have predicted the Bank of England base rate is likely to remain at ultra-low levels for some time yet, keeping the cost of borrowing cheap.
A recent Bank of England “credit conditions” survey of banks and building societies found that mortgage availability is set to increase further in the coming months.
Lenders told the Bank they expect demand for mortgages for house purchase to increase in the coming three months and that they have become more willing to lend to people with deposits under 10 per cent.
Other mortgage lenders cutting their rates recently include Tesco Bank, which said it is offering some of its lowest ever rates, and Yorkshire Building Society. Yorkshire has a two-year fixed-rate for people with a 35 per cent deposit at a rate of 1.18 per cent.