Follow this topicHSBC launches lowest five-year fixed rate mortgage ever
Good news for borrowers after a bit of long-term certainty - HSBC has launched the cheapest ever five-year fixed rate mortgage!
HSBC has launched a five-year fixed rate mortgage with a rate of 2.99% - the lowest rate of any mortgage of this kind.
As a result it has jumped straight to the top of the best buy tables, but be warned - the mortgage requires a hefty 40% deposit for borrowers and carries fees of £1,499.
The next lowest offer around is a 65% loan-to-value (LTV ) mortgage from Yorkshire Bank with a rate of 3.79%. Although the rate isn’t as good on this one, it has no fees for new customers and a £499 charge for those already with the bank.
Most other five-year fixed rate mortgages lie around the 4% mark. Cumberland Building Society’s 60% loan-to-value (LTV) offering for example, is set at 3.84% with fees of £699 while Monmouth Building Society’s 80% LTV deal is set at 3.99% with a £195 fee.
HSBC has also brought out a seven-year mortgage with its lowest ever rate of 3.99%, and the same booking fee. While this is also a market-leader, it doesn’t beat the historical record as there has been a rate of 3.69% on a seven-year deal from the Chelsea Building Society in the past.
The appeal of a long-term fixed rate
As both deals are fixed, this means the rate will stay the same throughout the initial term of the mortgage. This follows on from a growing trend of lenders lowering long-term fixed rates and will be attractive to borrowers who are looking for some stability over the amount they pay out each month.
However, the upfront fees are pretty steep with both of these deals and you’ll need a deposit of 40% to be able to get one, which largely rules out most first-time buyers.
The downsides
However, there are some that will argue that fixed rate mortgages - particularly long-term ones - are a waste of time at the moment. Bank base rate remains mired at its historic low of 0.5%, and doesn't look like moving for some time to come. In fact, the money markets are not pricing in a rise in base rate until 2017 - another five years away!
As a result, a cheap tracker mortgage begins to look like a gamble worth taking. Across the board they are cheaper than their fixed rate rivals; after all, you pay a premium for the certainty of knowing what your rate will be each month. And given that when rates do begin to rise, they will likely do so slowly, you should have plenty of time to determine when you want to switch to an alternative deal.
I've highlighted the top five-year fixed rates below. If you want to check out the tracker mortgages you qualify for, be sure to use our mortgage centre.
What do you think about the fixed rate vs tracker rate debate? Is a fixed rate a waste of money at the moment? Or is a tracker deal still a risk you're not willing to take? Let us know your thoughts in the comment box below.
|
Lender |
Rate |
Fee |
Max LTV |
|
2.99% |
£1,499 |
60% |
|
|
3.79% |
£499 (for existing customers, fee-free for new customers) |
65% |
|
|
3.79% |
£549 (£540 for first-time buyers) |
70% |
|
|
3.84% |
£699 |
60% |
|
|
3.89% |
£995 |
70% |
|
|
3.99% |
£195 |
80% |
|
|
3.99% |
£1,495 |
75% |
|
|
4.18% |
£995 |
75% |
|
|
4.24% |
£795 |
75% |
|
|
4.29% |
£499 |
65% |
Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online
At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.
This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
More on mortgages:
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When should you stop renting and buy?
How to stand the best chance of getting a mortgage
Seven reasons mortgage lenders turn you down
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