Lenders fight to cut mortgage rates
The battle between lenders to chop down the mortgage rates on offer has intensified, with a company unveiling a new five-year deal with a record low rate of under 2%.
On Monday, HSBC said it will launch a five-year fixed-rate mortgage with a rate of 1.99%. Experts said this is the lowest rate deal of its type that they have ever seen on the market.
However, borrowers must have a 40% deposit to take out the deal, which also comes with a booking fee of £1,499.
Charlotte Nelson, a spokeswoman for financial information website Moneyfacts, whose records go back to 1988, said: "This 1.99% deal is the first five-year fixed-rate mortgage to be launched below 2% and is the lowest on record that Moneyfacts.co.uk has seen."
According to Moneyfacts' records, the average rate on a five-year fixed rate mortgage lenders are offering across all deposit sizes is now 3.55%, having fallen from 4.04% a year ago. Five years ago, the average five-year fix came with a rate of 5.87%.
Ms Nelson continued: " The competition to be the lowest in the mortgage market shows no signs of stopping and is great news for borrowers.
"Moneyfacts.co.uk has seen 15 providers cut rates across their ranges in the past seven days alone. Lenders want to appear in the 'best buys' so they are constantly reducing rates to remain competitive."
Ms Nelson said when looking for a fixed-rate mortgage deal, borrowers need to consider not just the rate but the whole package attached to the mortgage, including any fees, which can add significantly to the overall cost of the home loan.
Experts have predicted the Bank of England base rate is likely to remain at ultra-low levels for some time yet, keeping the cost of borrowing cheap.
A recent Bank of England credit conditions survey of banks and building societies found that mortgage availability is set to increase further in the coming months.
Lenders told the Bank they expect demand for mortgages for house purchase to increase in the coming three months and that they have become more willing to lend to people with deposits under 10%.
Other mortgage lenders which have been cutting their rates recently include Tesco Bank, which said it is offering some of its lowest ever rates, and Yorkshire Building Society.
Yorkshire Building Society currently has a two-year fixed-rate deal for people with a 35% deposit at a rate of 1.18%, which it said is the lowest rate it has ever offered.
The deal comes with a fee of £1,369. It also offers a 1.29% two-year fixed rate for people with a 35% deposit with a lower product fee of £845.
Meanwhile, Norwich and Peterborough Building Society is offering a 1.64% two-year fixed rate with a £195 product fee to borrowers with a 35% deposit.