The steady decrease in fixed-rate mortgage prices continues as HSBC announce new mortgage plan with a five-year fixed-rate of 2.48%, edging ever closer to the record lows set by Yorkshire Building Society at 2.44% in August 2013.
This serves to confirm analysts’ predictions that we’ll be waiting until late 2015 before mortgage rates start rising again; a breath of fresh air for those who have been worrying since they started to rise towards the end of 2013.
This comes as lenders fight to hit targets by the end of the year in an increasingly competitive market, meaning savings for borrowers – a £150,000 mortgage with HSBC could now save you over £6,000 over five years, compared to the previous rates.
HSBC’s new deal: a best-buy?
On the market since Monday, HSBC’s new deal comes with a £999 fee and requires a 40% deposit, stacking up well next to the one of the next best plans available which comes from Leeds Building Society, which carries a rate of 2.59% and requires a £1,999 fee and a 35% deposit.
A 25-year mortgage for £150,000 with Leeds Building Society’s best plan would thus cost £1,500 more than HSBC’s new equivalent. With HSBC’s plan, monthly payments would be £671, leading to a total cost of £41,283 over five years (with fees taken into account); whereas with Leeds Building Society you can expect to pay £679 a month which, with fees included amounts to a total cost of £42,783 over five years.
Virgin Money offer a deal with exactly the same rates as Leeds Building Society, but with a £1,495 fee, saving more than £500; though this still makes it £1000 more expensive than HSBC.
For those wishing to avoid upfront costs, West Brom Building Society only require a £599 fee for a five-year fixed rate of 2.79%. Barclays are now offering a five-year plan with the same rate but a £999 fee and a 30% deposit.
What about other mortgages?
This fall in prices can also be seen to a slightly lesser extent with 2-year mortgage plans, with The Co-operative Bank offering shorter term plans with a 1.54% fixed-rate, requiring a £999 fee and a 40% deposit.
First Direct, a sister company of HSBC is offering a staggeringly low rate of 1.39% for a two-year deal, but the hefty £1,999 fee means that, despite the rates being the lowest on the market, the final product ends up being more expensive than many of the competitors. This goes to show the importance of shopping around and weighing up the relative importance of interest rates and up-front costs.
Following the general trend of dropping rates, Barclays/Woolwich have begun offering a two-year tracker mortgage with a 1.29% implied pay rate (stated explicitly at 0.79% over the Barclays bank base-rate).
Tracker mortgages are becoming increasingly popular with those who are less averse to risk, and, as Aaron Strutt at Trinity Finance is quoted as saying: “Now that there is less talk of an increase to the Bank of England base rate, the lenders feel more comfortable offering cheaper tracker rates”.
Customers are often advised to purchase plans that allow for a switch to a fixed rate as and when the relevant base rate goes up, as is the case with Barclays/Woolwich deal mentioned above. This somewhat reduces the element of risk associated with tracker mortgages.
For more information on mortgage finance view our helpful Guide to Mortgages which explains everything you need to know from how much to borrow to the mortgage lending process. Alternatively speak to one of our experts today.