High street giant HSBC has launched the new lowest five-year fix rate mortgage on the market - at 1.69% with a £999 fee if you borrow 60% of your home's value.
It makes it the cheapest such deal on the market, according to David Hollingworth, associate director at broker L&C Mortgages. The next most competitive five-year fix is from Yorkshire Building Society at 1.74%.
This is the latest salvo in an ongoing price war among mortgage lenders.Last month Atom launched a 1.29% five-year fix which only lasted a week which was the cheapest five-year deal ever.
HSBC cuts 14 rates
It's not just the deal at 60% loan-to-value (LTV) that’s on offer to borrowers – HSBC has announced 14 rate reductions. This includes a two-year fix at 90% LTV reduced to 1.94% with a £999 fee and a 0.25% cut to 2.69% on its 10-year fix at 70% LTV with a £999 fee and free valuation.
Hollingworth says: "This is yet another signal the mortgage market is more competitive than ever and lenders are scrapping it out to attract business.
"More lenders fighting for business means that they need to stand out from the crowd and truly differentiate themselves. This, coupled with some easing in cost of funds, is forcing lenders to offer rates that demand attention. As a result, lenders are squeezing whatever they can out of their deals and offering more and more eye-catching rates.
"Ironically, this means some borrowers are playing a waiting game rather than grabbing the opportunity in front of them. Our research found that more than a third of borrowers are languishing on standard variable rates despite the fact that ultra-low mortgage rates are widely available."
Mortgage fixes best for budgeting monthly payments
Five-year fixes are best for those who have no plans to move in the next five years and want the security of knowing what their monthly mortgage payments are going to be over that period.
The risk is that if you exit the deal early – should you need to move to work overseas, overseas, for example – you can end up paying a pricey penalty of up to 5% of your outstanding mortgage in many cases. And while you may be able to move your mortgage to another property, you may have to also pay a higher interest rate on new borrowing. See Fix vs Variable help.