We take a closer look to see if this could be the right mortgage for you….
What’s the deal?
HSBC is offering a two year fixed rate of 1.98%, but you need a 40% deposit to put down, or the equivalent amount of equity in your home if remortgaging.
The deal has a £1,999 arrangement fee. However, if you have a current account with HSBC, you will pay a lower arrangement fee of £1,499.
The maximum amount you can borrow at this rate is £250,000, so this deal won’t suit those who need a particularly large mortgage.
Most first-time buyers will also be excluded because of the requirement to put down a hefty 40% deposit. HSBC does offer fixed rate deals to those with smaller deposits, but at much higher rates. For example, its two-year fixed rate for homebuyers with a 10% deposit to put down is at 4.19% with a £599 fee.
The 1.98% deal has a very steep £1,999 arrangement fee unless you bank with HSBC, so for those wanting a smaller mortgage, it may actually work out to be more cost-effective to opt for a higher rate, but with a much lower fee, or no fee at all.
David Hollingworth, at mortgage broker London & Country said: “HSBC’s new rate takes a tiny 0.01% off its flagship two-year fixed rate in a clear bid to catch the eye by pushing the rate slightly lower than its competition.
“But does that make it best buy material? It is certainly the lowest rate on the market but the big fee will have a major impact in pushing up overall cost which is bound to put many borrowers off.”
What’s the verdict?
Although the HSBC deal offers a market-leading rate, the huge arrangement fee makes it less competitive than some alternative deals.
For example, Norwich & Peterborough Building Society offers a two-year fixed rate at a marginally higher 1.99% but with a much lower £995 fee, again for those borrowing up to 60% of the property value.
David Hollingworth said: “For those looking for mortgage completely at the other end of the fee scale Woolwich offers a very good remortgage deal. Fixed at 2.99% for two years it carries no fee, offers a free valuation and legal work and a £300 cashback on top, and is available to those borrowing up to 70% of the property value.”
For more mortgage deals available at varying levels of deposit, visit our mortgage channel.
You can also contact our mortgage partner, London & Country for free, independent advice on 0844 209 8725.
The more you can save for a deposit, the greater access you will have to competitive mortgage deals. That said, don’t assume that if you don’t have a huge deposit you won’t be able to get on the property ladder, as lenders are gradually increasing the number of deals available to those with a 10% deposit to put down.
You can improve your chances of being accepted for a mortgage by making sure you have a strong credit report. If there is anything on your credit report that you want to dispute or explain, you can add a ‘notice of correction’ free-of-charge, which all lenders are obliged to consider.
Your credit report is easy to obtain from on the credit reference agencies, the largest of which are Experian, Equifax and CallCredit.
Each of these agencies offers a 30-day free trial for unlimited online access to your report but costs beyond this vary.
You can compare what’s available at MoneySupermarket’s credit reporting channel.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.