HSBC deal fuels mortgage price war

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HSBCThe mortgage price war among lenders intensified today as a bank launched a deal with a record sub-1.5% rate.

The two-year fixed-rate mortgage at 1.49% is available from HSBC - but borrowers need a hefty 40% deposit and a £1,999 fee in order to qualify.


The rate is the lowest for this type of deal that financial information website Moneyfacts has on its records, which go back to 2007, before interest rates fell to record lows.

Lenders have been scrambling to slash mortgage rates since the Government launched a flagship scheme one year ago to kick-start the housing market.

The average rate offered across the market on a two-year fixed deal for someone with a 40% deposit or equity has plummeted from 4.47% one year ago to 3.32% according to Moneyfacts.

There have also been signs that the price war has trickled down to help more people with smaller deposits in recent months as lenders have reported more first-time buyers entering the market.

The typical two-year fixed rate for someone with a 10% deposit has edged down from 5.48% this time last year to 4.63%.

HSBC is not part of the Government's Funding for Lending scheme, which gives lenders access to cheap finance on condition they pass the benefits on to borrowers. But it has helped to ramp up competition in recent months by bringing out some attention-grabbing rates.

Mortgage experts have said borrowers should bear in mind the fees which come with the rates on offer across the mortgage market when trying to work out the cheapest deal, particularly on short-term products.

Rachel Springall, spokeswoman for Moneyfacts, suggested that people looking for a lower fee might want to consider a deal from the Post Office, which has a higher rate of 1.99% for people with a 40% deposit but a smaller fee at £995.

Ray Boulger, senior technical manager at John Charcol, said five-year deals are currently the most popular type of fixed-rate product being chosen by the firm's clients, as borrowers move to lock in the low-rate deals on offer.

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