HSBC slashes mortgage rates to below 4% as ‘price war’ heats up
HSBC has announced that it will be cutting its mortgage rates to below 4% ramping up the mortgage "rates war".
The high street bank says its new deals will be introduced tomorrow (Thursday, January 4) and will include a two-year fixed remortgage deal for 4.49% and a five-year deal for 3.94% for those borrowing up to 60% of the property value. HSBC is the latest high street lender to announce major cuts to its fixed rate deals. Those looking for a longer fix can also get the ten-year fixed rate which starts at 3.99%.
An HSBC spokesperson said: "Our new fixed mortgage rates will see significant cuts across the board which will be a welcomed move. Specifically, for customers wishing to remortgage, our rates will start from 3.94% for a five-year deal at 60% LTV [loan-to-value] with a £999 fee."
This is the first time mortgage rates have dropped this low since June last year. The news comes after the UK's largest mortgage provider Halifax cut rates by up to 0.85 percentage points yesterday. Lloyds Banking Group - which owns Halifax - has also cut rates by the same amount. Alongside this, Leeds Building Society also announced rate cuts this week and now offers a two-year fixed rate of 4.6% - which is a 0.49 percentage point drop.
David Hollingworth, associate Director at L&C Mortgages described HSBC's move as "notable" as the rates on offer are being marketed to borrowers looking to remortgage. This is a change to other lenders who have "favoured home movers".
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David said: “These cuts are just the latest salvo in an increasingly fast-moving market. Although borrowers coming to the end of their current fixed rate this year will still be looking at a rise in payments, these new lower rates will at least take some of the sting out of the inevitable rise.
"With large numbers of borrowers anxiously approaching the expiry of a fix taken during the ultra low rate period, this is a welcome move and hopefully a signal for more lenders to follow suit, improving options for those facing payment shock. We thought the New Year would start with a bang and that’s proving to be the case.”
Mortgage rates have slowly come down over the last few months in a bid to entice customers. Rates finally dropped below 6% in December after reaching a rate of 6.85% in August. As more lenders jump on the bandwagon, mortgage broker Ranald Mitchell, of Charwin Private Clients said the “unprecedented rate war is well underway”. Going forward, it's predicted that “seismic moves” are to be expected in the coming months.
The new year rate cuts come after the Bank of England held its base rate at 5.25% for the third time last month. At the time, the central Bank said it was "too soon" to think about dropping interest rates as rising inflation was still a risk. However, inflation fell sharply in the 12 months to November and now sits at 3.9% - down from 4.6%.
However, this bigger-than-expected fall had economic and industry experts believing the Bank of England rates could drop much faster than initially anticipated. Some economists suggest a reduction in the bank's base rate could come in May.
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