A new mortgage rate has been launched by a major bank which is said to be one of the 'best' deals since before the mini budget last September. HSBC is now offering a five-year mortgage under 4 percent which comes after the Bank of England raised interest rates last week.
On February 2 the Bank announced it had increased interest rates for the tenth consecutive time, with the base rate now at 4 percent. The decision was made in a bid to lower inflation to 2 percent - a target set by the government.
After the news broke mortgage holders were understandably concerned that this would mean their monthly mortgage repayments would rise in line with the increased rates.
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HSBC is now offering a five-year fixed rate mortgage for 3.99 per cent for borrowers with a 40% deposit, with a £999 fee.
It is the first time since September 2022 that a five-year fixed-rate mortgage has been offered by HSBC at a rate below 4%, which proves to be a good sign that the market is now settling following the turmoil from the autumn budget.
The deal however is only available to homeowners who are remortgaging or those who are switching rates, therefore existing customers rolling off an old deal and on to a new one with HSBC.
The move is part of a wider range of mortgage rate cuts made by HSBC UK on Tuesday, following recent reductions in swap rates, which lenders use to price mortgages.
Many mortgage deals vanished from the market following the mini-budget last September and when mortgages returned they were priced at significantly higher rates.
In recent weeks there have been signs of the fixed-rate mortgage market settling down.
According to figures from financial information website Moneyfacts.co.uk, the average five-year fixed-rate mortgage on the market at the start of January was 5.63%. By the start of February it had fallen to 5.20%.
Borrowers on variable rate mortgages meanwhile have been feeling the impacts of recent rises in the Bank of England base rate.
Moneyfacts.co.uk said on Tuesday morning that HSBC UK is the only lender on its records offering a sub 4% five-year fixed mortgage.
However, the website said it has seen below 4% rates offered on 10-year fixed mortgage deals by Virgin Money and Lloyds Bank.
Rachel Springall, a spokeswoman for Moneyfacts.co.uk, said: “It’s encouraging to see fixed mortgage rates coming down for borrowers looking to secure a new deal.”
She added: “Due to the unpredictable nature of the mortgage arena, it is imperative that both those looking to purchase a property or who wish to refinance seek independent advice from a broker to navigate the options available to them.”
Those borrowers that understandably decided to sit on their hands when rates went through the roof last October should now seriously consider if it’s time to take advantage of these significant improvements.
David Hollingworth, associate director at mortgage broker L&C, said: “The thought of being able to fix at a rate lower than base rate (at 4%) would have sounded like dreamland in recent months.
“But, despite base rate continuing its upward trajectory, fixed-rates have been falling and borrowers are now faced with a very different picture.
“Although those coming to the end of a fixed-rate taken during the low in rates of recent years will still be faced with higher payments than they have been used to, it’s a far cry from the prospect of rates at 6% or more.
“These deals are beginning to offer rates that many may have feared were headed for extinction.
“Those borrowers that understandably decided to sit on their hands when rates went through the roof last October should now seriously consider if it’s time to take advantage of these significant improvements.”
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