HSBC slashes fixed rate mortgage to all-time low

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HSBC is fueling the mortgage price war with the lowest fixed rate ever seen in the UK mortgage market.

The two-year fixed rate is priced at a jaw-dropping 1.49% and steals the thunder of both Chelsea Building Society and Yorkshire Building Society which had previously been topping the best buy tables with deals priced at 1.64% and 1.66% respectively. The HSBC deal had formerly been priced at 1.68%.

But the deal won't suit everyone. For starters it will only be available to borrowers with a deposit worth at least 40% of the property's value. Plus it comes with a hefty £1,999 fee.

At the end of the two-year term the rate will revert to the lender's standard variable rate, currently 3.94%.

Commenting on the deal, David Hollingworth, head of communications at mortgage adviser London & Country, said: "It's a great deal but you need to be wary of the fee."

The mortgage is available on loans up to £500,000, and for those borrowers with loans in this ballpark it could be a very cheap deal, but for those with more typical loan sizes, Hollingworth said it could make sense to pay a higher rate on a loan with a more reasonable fee structure.

"For example, Norwich & Peterborough is currently offering 1.99% for two years, up to 65% loan to value with a fee of just £295. It also offers help with valuation and legal fees," he says.

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