HSBC launches UK's first sub-1% fixed-rate mortgage

Property buyers can now lock in a sub-1% mortgage for two years, as HSBC has launched the UK’s lowest ever fixed-rate mortgage at 0.99%.

The deal is available to both buyers and those looking to remortgage, though you can only get it if you borrow up to £500,000 and have an up to 35% deposit (65% maximum loan-to-value). 

After the two-year fix ends, the standard variable rate (SVR) kicks in at 3.94%, although this figure can change at any time.

Rachel Springall, financial expert at Moneyfacts.co.uk says “This new 0.99% two-year fixed deal from HSBC enters the market as the lowest fixed rate available, and the first sub-1% fixed deal since our records began.”

However, the HSBC deal has a £1,499 product fee, which means it could be beaten by a mortgage with a higher rate that has lower fees.

 

Mrs Springall warns: “As with any deal, applicants should always work out the true cost of the mortgage to decide whether it’s right for them.”

For example, someone borrowing £150,000 on a £250,000 property over 20 years would pay £689 a month with HSBC’s new deal. After factoring in the fees, the total cost over two years is £18,035. If buyers don’t remortgage after the fixed rate period ends, monthly repayments will rise to £882, assuming the SVR doesn’t change.

However, Norwich & Peterborough Building Society’s two-year fix at 1.49% could work out marginally cheaper over the first two years, as its fees are just £635. With £723 monthly repayments, the two year cost is £17,987 - £48 cheaper than the new HSBC deal.

But if buyers don’t remortgage with Norwich & Peterborough after the fixed rate period they could get stung. Its SVR is currently 4.99%, and if that doesn’t change, repayments would skyrocket to £961 a month.

Published: 21 June 2016
Last updated: 24 June 2016

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