HSBC launches sub-4pc mortgage in escalation of price war

HSBC has launched a sub-4pc mortgage in an escalation of a price war between lenders as fears grow about a wave of missed payments.

The FTSE 100 bank became the first high street lender to reduce interest rates on its mortgages below the Bank of England base rate since the market turmoil triggered by Liz Truss’s minibudget in September.

It comes as bank chiefs become increasingly concerned about a wave of arrears amid a darkening economic outlook. At a meeting of the Commons Treasury select committee yesterday, the chief executives of Britain’s biggest lenders warned that borrowers face a squeeze as they remortgage this year.

Ian Stuart, chief executive of HSBC UK, said: “In terms of distress, I just want to put a health warning out there. I think the headwinds are ahead of us, they’re not behind us.

“We’ve got 222,000 customers this year who will change their mortgage. The vast majority of those are going to see some increase in pricing. There’s no stress today but I put caution in there.”

Charlie Nunn, chief executive of Lloyds Banking Group, told the committee that one in 10 of its customers faces a rise in mortgage costs this year as they come off fixed rate deals.

MPS are accusing bank chiefs of failing to pass on higher interest rates to savers and prioritising profits.

Labour MP Angela Eagle asked why banks were being “so ungenerous” on the rates they offer on instant saver accounts, accusing them of profiteering.

Dame Alison Rose, chief executive of Natwest, said: “Our digital regular saver which is paying 5pc is encouraging people to build that savings habit. That works very well for our customers, 80pc of them have less than £5,000 in their account.” HSBC has reduced interest rates on 130 of its mortgages and now offers a remortgage deal fixed at 3.99pc for five years, available to borrowers with a 40pc deposit.

Five-year fixed rates peaked at about 6.5pc in October and have steadily declined since markets calmed. Fixed rates are forecast to fall further as a price war between banks heats up.

David Hollingworth, of broker L&C Mortgages, said HSBC’S five-year deal was a turning point. “The thought of being able to fix at a rate lower than Bank Rate would have sounded like a dream land in recent months.”