If you are looking for a low fixed rate mortgage, you’ll be pleased to learn that on Friday, HSBC launched a five-year fixed rate mortgage at 2.99%, which is an incredibly low rate. There are some restrictions which means that not everyone who applies will be able to take advantage of this mortgage offer, the main one being that you need a hefty deposit of at least 40%, or, if you are remortgaging, the equivalent amount of equity in your home. Since the base rate fell to 0.5% in March 2009, mortgage rates have been at their lowest for years and homeowners and buyers have enjoyed these low mortgage rates for a substantial amount of time. However, this is the first time we have seen a five year fixed mortgage rate below 3.00%. HSBC has also launched its lowest ever seven year mortgage rate at 3.99%.
So what’s the deal? Well as we said, HSBC is offering a mortgage rate of 2.99%, fixed for five years, to borrowers who have a large deposit of 40% of their property’s value to put down or, if remortgaging, the equivalent amount of equity in their home. The good points are that this mortgage can be transferred to another property if you move house during the five-year fixed rate period, however, if you do need to borrow additional funds, these will be charged at a different rate if this mortgage deal is no longer available. This is a good deal for those who have a large deposit, or who already have a mortgage that is almost paid off with a large equity and want a better deal for the remaining life of their mortgage. It also offers security that their mortgage payments will stay the same, regardless of what happens to the Bank of England base rate. And at 2.99%, this mortgage rate is cheaper than most banks’ standard variable rates, which can change at any time.
So what are the catches?
Both the five and seven-year mortgage deals have a booking fee of £1,499 respectively. This is a very high arrangement fee but the rate is still very low for five years and worth considering. You can only borrow a maximum of £500,000, and there are early repayment penalties, equivalent to 1% of the amount repaid, which apply if you pay back the mortgage during the fixed rate period. The biggest catch on this mortgage deal is that if you need a large deposit or if you have little equity in your house you will not qualify, regardless of whether you have the booking fee or not. However, as we said, there are some great five year fixed rate mortgage deals out there, that you can still take advantage of, even if you do not have a large deposit or much equity in your home.
For example, with an arrangement fee of only £549, Nationwide Building Society is currently offering a five-year deal fixed at 3.79% to borrowers who have a 30% deposit or the equivalent amount of equity in their home. For a £999 arrangement fee the Leeds Building Society can offer you a five year deal at 3.95% if you have a 20% deposit or equity. And if you only have a 10% deposit or have 10% equity in your home, then HSBC has a five-year deal fixed at 4.79%, with an arrangement fee of £999.