HSBC Mortgage At 1.99% – Grab It If You Can And Save Up To £6,700 A Year

HSBC is offering a crazy low mortgage rate – a 1.99 per cent discounted for two years mortgage that will appeal to thousands of borrowers.

If you can get it, then this is a great deal for you. But be quick. This rate is unlikely to hang around for long, so get in touch with a broker as soon as you can.

Lowest rate available

It is currently one of the lowest rates available on any product, and even beats the previously low standard variable rates (SVRs) of 2.5 per cent from lenders such as Lloyds TSB and Cheltenham & Gloucester. If you are still on those SVRs or higher – Chesham Building Society is currently charging 6.45 per cent – then you should take a look at remortgaging.

There are some catches:

• The HSBC deal is discounted by 1.95 percentage points for two years from its standard variable rate, so the rate can go up or down, although up is more likely from where we are starting, if rates change.

• You have to have 40 per cent equity in your property to qualify for the deal, which will rule out many borrowers, and pay £999 to secure it. So on a £200,000 property, you would need to be looking to borrow just £120,000.

• Since the deal is so good, HSBC is likely to be able to cherry-pick the borrowers it wants. If you have any kind of credit problems, you could be refused the loan, which impacts on your future borrowing. So check your credit rating before you apply.

Save up to £6,690 a year on a £150,000 mortgage

If you can jump over all the hurdles, and you can bear the risk of rates rising, this would be the deal for you. If you have a £150,000 mortgage, and you are paying the lowest standard variable rate available at 2.5 per cent, then you would be paying £3,750 a year in interest – or £312.50 a month. Moving to this HSBC’s deal of 1.99 per cent would mean you are paying £2,985 a year in interest – or £248.75 a month. That is a tasty saving of £765 a year, or £63.75 a month, and that is on the lowest standard variable rate.

If you are on the Chesham Building Society’s 6.45 per cent rate, then you would be paying £9,675 a year on £150,000 interest only. Changing to this HSBC rate would save you a massive £6,690 a year – or £557.50 a month.

Aimed at those remortgaging

This is the second time HSBC has come up with this deal – it offered the same rate in September last year, although this time the fees are £200 lower. Then, there was a flood of remortgage borrowers who were tempted to pick it up. This is the target audience again, although anyone who has a chunky deposit of 40 per cent as a first-time buyer or home mover could also benefit.

What else is out there for those who cannot get this rate?

Many borrowers interested in this would be turned down, as you need at least 40 per cent equity in your property to qualify.

For anyone who cannot get this rate, there are some other good rates on offer. First Direct is offering 2.39 per cent variable for anyone owning at least 35 per cent of their property. You can offset savings against this mortgage, and the arrangement fee is £499.

ING Direct is offering 2.89 per cent variable for those who own 25 per cent of their property. This has an arrangement fee of £500, and a booking fee of £195. This is a tracker mortgage, so any changes in the Bank of England base rate will be reflected automatically in rate changes on this mortgage.

Fixed rate mortgages

If you want a fixed rate mortgage, then one of the cheapest deals on the market at the moment is from Britannia. Its two-year fixed rate mortgage is at 3.19 per cent and is open to those who own 25 per cent of their property. It is expensive though, with an arrangement fee of £849 and a booking fee of £150.

Depending on how much you are borrowing, you might be better off with the 3.29 per cent two-year fix from Hanley Economic Building Society. It has an arrangement fee of £649, and a booking fee of £100.