HSBC became the latest lender to offer a mortgage deal with an interest rate below 1% in the latest exit from an escalating mortgage rate war.
Banks and building societies are fighting for clients in a frenetic real estate market described by the Chief Economist of the Bank of England as ‘on fire’ as the government’s stamp duty holiday combines with d ‘large deposits saved during lockdown to increase demand.
HSBC on Friday cut the rate on its two-year fixed product by 0.05% for those with deposits or equity of at least 40%, bringing it down to 0.99%. Borrowers have to pay a fee of £ 999, but the last time the bank offered such a low rate was almost five years ago.
HSBC said people who were considering moving up the real estate ladder, or had a fixed rate deal, could get “some of the lowest rates we’ve offered in some time.”
A number of lenders have already launched sub-1% deals with Platform, the intermediary lending arm of the Cooperative Bank, slashing the rate on its deposit product from 40% to just 0.95% this week. This is the lowest rate available on the market.
These offers were “great” if you had an impeccable credit score, a standard source of income and a very large deposit available, said Matthew Fleming-Duffy, director of Cherry Mortgage & Finance.
“These products are perfect for a minority of consumers and certainly place these lenders at the top of the best buy rankings, but for many potential borrowers – with more complex needs or smaller deposits – these attractive rates are sadly out of reach. “
Demand for real estate has pushed average home prices up 10.9% over the past year, the fastest pace in nearly seven years, according to the Nationwide Building Society. Prices rose an average of 1.8% in May, after rising 2.3% in April, according to the figures, pushing the annual rate of rise to 7.1% from a month earlier.
As a result, the average price of a house in Britain has peaked at £ 242,832, up almost £ 24,000 in the past 12 months. Ten years ago, in May 2011, the average UK house price was less than £ 170,000.
Mark Harris, managing director of mortgage broker SPF Private Clients, said it was a “super-competitive market for borrowers” with banks eager to lend given the low base rate. “Are we sitting here thinking how much the rates can go down?” ” he added.
“There is a desire from the big balance sheet lenders who have cash on their ledger at zero in terms of paying deposit rates, so even if it comes out at 1%, when that margin is meager, it is still a margin. “