HSBC launches 3.99% five-year mortgage rate

Some brokers had predicted the arrival of sub-4 per cent interest rates from next month, though some were wary the Bank of England's recent base rate rise could stall falls in rates.

HSBC is the only lender offering a sub-4 per cent deal on a five-year fix today, according to Moneyfacts. 

Virgin Money and Lloyds have already launched sub-4 per cent rates on ten-year fixes.

The thought of being able to fix at a rate lower than base rate would have sounded like dreamland in recent months.David Hollingworth, L&C

The last five-year deal to offer a rate below 4 per cent was withdrawn in early October, the month of the 'mini' Budget, according to L&C Mortgage's rate tracker. 

Since the October 'mini' Budget, fixed rates have peaked at over 6.5 per cent before falling back down again.

Between November and the end of January, the lowest two and five-year fixed rates across the UK's top 10 lenders have dropped by more than 1.20 percentage points.

Banks dealing with anxious buyers

Last week, the Bank of England raised the base rate to a 15-year high of 4 per cent.

Despite this, lenders like HSBC have continued to bring down their rates.

At a Treasury Committee meeting today (February 7), HSBC's UK chief executive Ian Stuart recalled how far the bank has come in just a few months.

In December, 60,000 HSBC customers were faced with the potential fate of 7 per cent mortgage interest rates.

"We set about how to get a mortgage product in the market, in December, starting with a four. So could we get a 4.99 per cent for our customers?" said Stuart

"Thankfully markets calmed quite a bit thereafter and we did manage to do that. But I have to be very honest, at that point, I did not know if we'd be able to do that.

"I'd say about 80 per cent of our time was focused on those 60,000 customers who were anxious."

Stuart said these customers were calling the bank in December in a fit of disarray.

"If you heard the strain in our customers, the anxiety in our customers was palpable. And we were all hands to the pump."

The new 3.99 per cent rate, Stuart said, will be a helpful mortgage product and underlines the point that lenders like HSBC do not link their interest rates to the base rate.

Associate director at mortgage brokerage L&C, David Hollingworth, said the thought of being able to fix at a rate lower than base rate would have sounded like dreamland in recent months. 

He added: "But despite base rate continuing its upward trajectory fixed rates have been falling and borrowers are now faced with a very different picture.

"Although those coming to the end of a fixed rate taken during the low in rates of recent years, will still be faced with higher payments than they have been used to, it’s a far cry from the prospect of rates at 6 per cent or more.

"These deals are beginning to offer rates that many may have feared were headed for extinction.  Those borrowers that understandably decided to sit on their hands when rates went through the roof last October, should now seriously consider if it’s time to take advantage of these significant improvements."

ruby.hinchliffe@ft.com