Perhaps the cheapest UK mortgage
In a further sign that the mortgage market is returning to health, 1,676 deals are available at the moment, more than at any time this year. As has been discussed at great length on this blog, the deposit required to buy a home has increased sharply over the past year as lenders have rationed their funds, but this is not necessarily a bad thing.
The financial information service Moneyfacts says 27% of new mortgage deals require a deposit of 40%. A year ago that figure was just 7%.
However, there are certainly some great deals out there for those who raise a large amount for a deposit. For example, HSBC has just launched a product with an interest rate of just 1.99% for those with a 40% deposit.
The low rate lasts for two years and is set at a 1.95% discount to the bank’s standard variable rate of 3.94%. This is a remarkably low rate of interest (if you have a 40% deposit) and it will be interesting to see if this prompts other lenders into launching their own discounted variable rates.
The product is part of the efforts HSBC are making in order to gain an even larger share of the mortgage market. HSBC was the largest lender in the UK in the first half of this year.
Analysts have described the product launch as ‘an aggressive move’ from HSBC and hope that it may shake up what has become a rather stagnant market.
If there is a flood of applicants chasing the headline 1.99% deal, it will be interesting to see if HSBC can manage demand or whether the offer gets oversubscribed and then discontinued within a couple of weeks.
Potential borrowers should also be aware that the HSBC deal comes with an arrangement fee of £1,199. The bank’s interest rate is higher, at 2.49% for those with a 25% deposit, and is 3.89% for those who have only a 10% deposit.
Those who are unable to raise such a high deposit need not be overly concerned. In the past month of so there has been a slight increase in the 10% deposit tier. This is encouraging news for first-time buyers whose efforts to take advantage of bargain prices are seen by many to be ‘propping up’ the mortgage market at the moment
Both property sales and prices have picked up this year, after the credit crunch and the recession caused an unprecedentedly sharp slump from the autumn of 2007 to the end of 2008.
