Mortgage rates drop to new lows
Mortgage lenders have trimmed more of their rates down to rock bottom lows as the battle for home owners' business hots up in the run-up to Christmas.
On Monday, HSBC will launch its lowest ever five-year fixed-rate mortgage at 2.48%. The deal will be available for borrowers with a 40% deposit and comes with a £999 fee.
Last month, the lender took the unusual step of launching a mortgage with a rate of 0.99% for customers with a 40% deposit.
The 0.99% deal is in effect a 2.95% discount off HSBC's 3.94% standard variable rate (SVR), which lasts for two years. From Monday, HSBC will also cut the booking fee on this deal by £500 to £1,499.
Yesterday, Santander launched its lowest ever two-year fixed-rate mortgage. Available only for people looking to remortgage, it offers a 1.84% rate for people with 40% equity and comes with a £995 fee. Santander said the deal will be available for "a limited time only".
Barclays has also made some mortgage rate cuts this week, with its new deals including a five-year fixed-rate remortgage loan at 2.79% for people with a 30% deposit, with a £999 application fee.
A string of lenders have been slashing their rates since the start of autumn and mortgage experts predict there will be more to come.
There have been some suggestions that lenders are looking to retain customers who are currently sitting on a standard variable rate (SVR) mortgage and who may decide to jump to another deal when the Bank of England base rate eventually starts to climb, with expectations that this will happen at some point towards the latter half of 2015.
Meanwhile, there has also been evidence that lenders are now playing catch-up in order to meet end-of-year lending targets.
Stricter mortgage lending rules came into force in April under the Mortgage Market Review (MMR) and this caused some disruption to the market as lenders adjusted to how they should interpret the changes.
A recent Bank of England report showed that mortgage availability shrank back over the summer, just after the new rules were introduced.
Despite signs that lenders are gaining a stronger appetite to offer home loans, concerns have also been raised in recent days that some groups of people, such as those aged over 40, are now having a tougher struggle trying to get a mortgage deal.
Rachel Springall, spokeswoman for financial information website Moneyfacts, said that while HSBC's 2.48% deal is the lowest of its kind that it can see on the market at the moment, Yorkshire Building Society did offer a similar deal last year at 2.44%.
Ms Springall said: "It's fantastic to see a high street lender offering a market low rate of 2.48%, it is likely to cause a stir in the market for long-term fixed deals."
She continued: "Customers sitting on an SVR or are even coming to the end of their current deal will be looking at the best rates out there, so by offering a headline rate this deal is bound to attract custom, however, as with any mortgage, borrowers need to work out the true cost of the mortgage first.
"The fact that this deal is a five-year fixed will furthermore boost its appeal to borrowers who want to lock into a low rate for the longer-term.
"As the end of the year approaches, banks and building societies will be aiming to meet their lending targets, therefore it won't be surprising if we see more of these low rates hit the market."
Ms Springall added: "A good all-round mortgage would ideally have a decent rate, low fee and an incentive package, but as these deals may not bathe in the same limelight as a market-low rate, it's wise for borrowers to seek out independent financial advice to find the right deal for them."