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Lender Cuts Mortgage Rate to 1.99%
The largest lender in Britain, HSBC, has announced it will offer a two-year discount mortgage rate of 1.99 percent. This special deal is only available to buyers who have at least a 40 percent deposit and there is also a £1,199 arrangement fee. The bank also has a two-year discount mortgage for those with a 25 percent deposit of 2.49 percent.
The two-year deal is linked to HSBC’s Standard Variable Rate (SVR) which is currently at 3.94 percent. The discounted rate will revert to the SVR once the two-year period is over, and may increase during the initial two years if the SVR does as well. While there are plenty of caveats to the special rate, it is a good sign that banks and lenders are starting to offer more competitive rates and mortgages.
The bank joins several others that have lowered rates and offered special deals recently. The lower interest rates have been triggered by the fall in interest rates over the past year. It has taken a little while for the mortgage rates to catch up to the lower lending rates, such as the inter-bank lending rate and the Bank of England’s Bank Rate. Lenders have been criticized for not passing on the savings to consumers, but the new deals could signal a shift. Recent figures show the profit margins banks are taking on mortgages have been at record highs this year.
Currently, the average two-year fixed home loan stands at 5.18 percent and five year deals are just over 6.2 percent. Typically, banks only change their SVRs when the Bank of England changes the Bank Rate, but they can change them at any time.
Other banks and lenders that have announced lower financing costs include the Woolwich and Cheltenham & Gloucester. HSBC also announced that it plans to double its 2007 amount of mortgage lending and is making £15 billion available for loans.
