Mortgages  

Banks launch record low fixed-rates

Banks launch record low fixed-rates

HSBC and TSB have launched the UK’s lowest fixed-rate mortgage rates at 0.94 per cent for large deposit holders.

After launching its first sub-1 per cent deal in five years last month, HSBC has now reduced this rate even further, from 0.99 to 0.94 per cent.

For HSBC, this is the cheapest ever home loan it has offered in the UK, as well as worldwide. The 60 per cent loan-to-value product includes a £999 fee.

TSB’s 0.94 per cent fixed rate is for borrowers looking to remortgage with a 40 per cent deposit. It includes a similar £995 fee.

Before HSBC and TSB made cuts to their rates yesterday (July 6), the lowest fixed-rate mortgage was offered by Co-operative Bank’s intermediary lending arm, Platform, at 0.95 per cent.

Currently, only five lenders are offering sub-1 per cent fixed-rate mortgage products, according to the latest Moneyfacts data. These also include Cumberland Building Society and Nationwide Building Society.

Whilst sub-1 per cent rates may grab borrowers’ attention, many in the industry are quick to point out the drawbacks which come with such deals.

"In reality, [these rates] mean nothing if you don't tick all of HSBC's policy boxes,” said Katie Cave, a director at Clearpoint Finance. “Anyone with debt, or with a less than perfect credit score, is unlikely to be able to borrow below 1 per cent.”

Lewis Shaw, founder of Shaw Financial Services, agreed. He said: “This deal will be appropriate for an incredibly small section of people but will generate far more headlines than it warrants."

But not everyone agrees. Graham Taylor, managing director at Hudson Rose, said the criteria from HSBC was “pretty sensible”.

He added: “Providing applicants have the required equity in the property and are looking for a short term fix, it is a great opportunity."

Karen Noye, a mortgage expert at Quilter, said the low rates would help lenders “drum up business” and “keep customers coming through the door even after the government schemes designed to keep the housing market afloat during the pandemic end”.

The stamp duty holiday started to taper this month. This returns the amount of a property’s value which incurs no stamp duty land tax to £250,000, compared to the more generous £500,000 in place since July last year.

In October, the stamp duty threshold will return to its usual level of £125,000, or £300,000 for first-time buyers.

ruby.hinchliffe@ft.com