HSBC slashes fixed rate mortgage to all-time low
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.
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
Loan to value
The LTV shows how much of a property is being financed and is also a way to tell how much equity you have in a property. The higher the LTV ratio the greater the risk for the lender, so borrowers with small deposits or not much equity in the property will be charged higher interest rates than borrowers with large deposits. The LTV ratio is calculated by dividing the loan value by the property value and then multiplying by 100. For example, a £140,000 loan on a £200,000 property is a LTV of 70%.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.