What's the deal?
HSBC has launched a two-year fixed rate mortgage priced at 1.49%, reverting to 3.94% after two years (overall cost for comparison is 3.7% APR).
The deal is the cheapest of its kind in history and has knocked Chelsea Building Society's two-year fix at 1.64% off the top spot.
However, unlike Chelsea's mortgage, which asks for a deposit of 35%, HSBC's offering requires a chunkier 40% deposit and also has a hefty £1,999 fee attached.
HSBC's mortgage is available on borrowing up to £500,000 and early repayment charges apply.
Who's it good for?
The two-year fixed rate mortgage from HSBC is a good choice for anyone who has significant equity in their home, or can stump up a large deposit, and is looking to freeze their monthly mortgage repayments for the next two years.
The main catch with the HSBC mortgage is the size of both the deposit and the fee. Even if you can afford to cough up 40% of the property's value, you'll still need to find an additional £1,999.
Chelsea Building Society's two-year fix priced at 1.64%, reverting to 5.79% after two years (overall cost for comparison is 5.2% APR), could therefore prove a more attractive option, not only because it requires a smaller 35% deposit, but because it has a smaller fee of £1,545 (though there is a mortgage processing fee of £130 to pay on top).
And given the fees are lower with Chelsea's deal, it can actually work out cheaper overall, depending on how much you're borrowing. For example, if you had a £150,000 mortgage, with Chelsea you'd pay £16,315 in total over two years, including fees, yet with HSBC you'd pay £16,375.
Chelsea's deal remains the cheapest option if you are borrowing anything less than £195,000 so it pays to do the maths. Remember though that HSBC's deal is only available on borrowing up to £500,000. In comparison, Chelsea's deal is available on borrowing up to £5million.
Finally, watch out for the early repayment charge that applies if you need to get out of the HSBC mortgage before the two years are up – this is quite complex so check the terms and conditions carefully.
What’s the verdict?
If you're looking to fix your mortgage repayments for two years, in terms of rate, you won't find a better deal than this one from HSBC. But don't forget to do your sums first to ensure it's definitely the best option for you.
If you're unsure which deal is right for you, contact our mortgage partner London & Country for free, independent advice on 0844 209 8725.
Should you prefer to fix your repayments for longer than two years, there are plenty of attractive options to consider. Yorkshire Building Society, for example, offers a five-year fixed rate mortgage priced at 2.44%, reverting to 4.99% after this time, providing you have a deposit of 35%. It has a £1,345 fee and the overall cost for comparison is 4.0% APR. Early repayment charges apply.
The very best deals are reserved for those with a top-notch credit rating. To ensure yours is as good as it can be, it's worth getting hold of a copy of your credit report from one of the credit reference agencies which you can compare on our credit monitoring channel. Then take a look at Jessica Bown's top tips on improving your score.
YOUR HOME MAY BE REPOSSESSED IF YOU DON'T KEEP UP REPAYMENTS ON YOUR MORTGAGE.