Cheapest mortgage deal hits the market

Would-be home buyers have been offered Britain’s cheapestever mortgage amid a boom in the property market. HSBC has cut the rate on its two-year fixed-rate deal to 0.94 per cent for those with a 40 per cent deposit, the cheapest home loan the bank has ever offered in the UK and worldwide. TSB also launched a 0.94 per cent two-year deal for borrowers remortgaging with a 40 per cent deposit last week, with a fee of £995.

WOULD-BE home buyers have been offered Britain’s cheapest-ever mortgage amid a boom in the property market.

HSBC has cut the rate on its two-year fixed-rate deal to 0.94 per cent for those with a 40 per cent deposit, the cheapest home loan the bank has ever offered in the UK and worldwide.

TSB also launched a 0.94 per cent two-year deal for borrowers remortgaging with a 40 per cent deposit last week, with a fee of £995.

The launch of the deals, at all-time low interest rates, marks the latest stage in an escalating price war among lenders that has pushed the cost of deals to below 1 per cent.

Banks and building societies have slashed rates to tap into the propertybuying frenzy spurred by the Government’s stamp duty holiday and increased demand for larger homes.

House prices rose at the fastest pace in more than 16 years in June, according to lender Nationwide, as buyers rushed to take advantage of the concession, which removed the duty on houses worth up to £500,000. The tax-free threshold fell to £250,000 this month and will revert to £125,000 in September. That surge in demand, coupled with the record low 0.1 per cent interest rate set by the Bank of England, has led to historically cheap home loans.

Iain Swatton, of the mortgage switching service Dashly, said: “It’s a smart move from lenders such as HSBC to offer low interest rates on mortgage products. This is a clear sign that lenders want people to buy houses.”

Borrowers with large deposits have access to the cheapest loans, with the average two-year fix for those with a 40 per cent deposit at 1.57 per cent, down from 1.79 per cent in April last year.

HSBC and TSB’S latest deals are the lowest offered in Britain since records began, according to analysts Moneyfacts.

HSBC’S deal comes with a £999 fee, with a feeless option also available at 1.14 per cent. The deal is available to those borrowing from £10,000 up to £5m and comes with early repayment charges of 2 per cent of the outstanding balance. The bank also cut rates for borrowers with a 15 per cent deposit by 0.3 percentage points to 1.99 per cent.

Jonathan Harris, of the mortgage broker Forensic Property Finance, said: “Whether these low rates will be around for long is hard to say. Even if rates were to edge further downwards, they surely can’t get that much cheaper when they are already at lowest-ever levels, and someone fixing at 0.94 per cent will be getting a competitive deal.”

TSB’S deal is available to those borrowing between £5,000 and £1m. It also comes with £300 cashback, but is only on offer to those remortgaging.

Platform, Cumberland Building Society and Nationwide also offer two-year fixes for 40 per cent deposit borrowers at less than 1 per cent, with respective rates of 0.95 per cent, 0.98 per cent and 0.99 per cent. Santander offers a 1 per cent deal for borrowers with a 30 per cent deposit.

Rachel Springall of Moneyfacts said: “Whether the lowest fixed rate is the most appropriate choice will depend on the loan size and someone’s circumstances, so it’s important borrowers weigh up the overall cost of the deal before they commit. With competition continuing, it will be interesting to see how low lenders are prepared to go.”

Borrowers looking to lock for longer can now access the cheapest ever fiveyear mortgages, with the lowest rate standing at 1.09 per cent, from TSB.

‘With competition continuing, it will be interesting to see how low lenders are prepared to go’