UK mortgage price war hots up with 0.94% fixed-rate deal

Deals offered by HSBC and TSB are available only to borrowers with hefty deposits

UK mortgage borrowers now have the choice of two loans with interest rates fixed at 0.94% for two years as the price war between lenders heats up.

HSBC and TSB are offering the ultra-low rate, which undercuts the previous best buy of 0.95%, and adds to a rising number of sub-1% deals for borrowers with large deposits.

HSBC said 0.94% was the lowest rate it had ever offered. Its mortgage comes with a £999 fee and is available to homebuyers and remortgagors. TSB’s deal, which was launched last week, is available to remortgagors only and has a £995 fee.

Previously, the cheapest deal on the market was a two-year fixed-rate at 0.95% from Platform, part of Co-operative Bank. It has a £1,499 fee and is available only via mortgage brokers.

The mortgages are available only to borrowers with at least a 40% deposit. Those with less equity will pay higher rates.

HSBC has a five-year fixed rate of 1.29% for those borrowing up to 75% loan-to-value (LTV), while those borrowing 95% of the cost of their home can fix for two years at 3.39%. Remortgagors at TSB can fix for two years at 1.09% up to 75% LTV but that rises to 3.14% for between 85% and 90% LTV.

The rates are among the lowest ever offered and show how keen lenders are to attract borrowers.

HSBC’s deal is available on loans of up to £5m. However, Ashley Thomas, a director at the mortgage broker Magni Finance, said anyone borrowing less than £500,000 would pay less if they took HSBC’s no-fee deal with a 1.14% rate.

Katie Cave, a director at the brokers Clearpoint Finance, warned: “Beware buying into short-term savings and losing out on longer-term better value.”

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