HSBC launches lowest five-year fixed rate mortgage ever
HSBC has launched a five-year fixed rate mortgage with a rate of 2.99% - the lowest rate of any mortgage of this kind.
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 bought 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.
As interest rates are set to go up at some point, choosing a long fix means you're safeguarded from a hike in your monthly mortgage repayments for a while and it also gives you a longer period before you'll have to think about switching mortages again.
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.
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.
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