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Lowest ever mortgage rates offered by HSBC and Barclays

HSBC are offering a rate under 1% with Barclays also dropping their rates to 'all-time lows'

Rock-bottom mortgage rates

A mortgage ‘price-war’ is already leading to rock-bottom mortgage rates, with HSBC and Barclays releasing their lowest ever rates onto the market.

HSBC have released a mortgage rate below 1%, with Peter Dockar, Head of Mortgages at HSBC, saying the bank is “…leading the way by offering a mortgage of less than 1%.”

In response, two other of the UK’s biggest banks have lowered their rates, with Barclays also offering their lowest ever rates.

Mortgages are likely to continue to become cheaper as the big lenders compete for customers and the Bank of England’s Chief Economist, Andy Haldane, said rate rises were likely to be pushed back later into 2015.

HSBC: offering 0.99% variable rate

Borrowers with a 40% deposit will be able to get an initial rate of 0.99% – a 2.95% discount off HSBC’s Standard Variable Rate.

This discount lasts for two years, but as it is a variable rate HSBC can raise it at their distrection at any time, so there is no guarantee this mortgage will be below 1% for long

Their two year fixed rate mortgage is at historic lows at 1.49%.

However mortgaging at either of these rates comes with a £1,999 booking fee.

Barclays : offering a 1.88% two year fix

Barclays announced today that they are offering their lowest ever rates. Borrowers with a 40% deposit can benefit from rates as low as 1.88% for a two year fixed term.

The bank is also offering low rates for longer fixes:

  • Three year fixed rate at 2.29%
  • Five year fixed rate at 2.85%
  • Ten year fixed rate at 3.49%

There is a a £999 booking fee to switch to any of these rates, but existing Barclays customers could enjoy a ‘loyalty fee’ half that price of £499.

Santander: offering a 1.94% fixed rate

In response the Spanish banking giant Santander also cut their initial rates for mortgages by 0.31% to 1.94% for a two year fixed rate mortgage for borrowers with at least 40% deposit.

The booking fee is half the price of HSBC’s, at £995.

Why are rates so low and will it last?

The cost of lending and the number of mortgage customers are currently falling, according to Bank of England figures released last week, causing lenders to try and entice customers in with new cheap rates.

The cost in lending is low because ‘swap rates’ – the price of money that banks sell to each other at – are falling towards the end of the year. However, this might not last into the new year.

Andy Gray, managing director of Mortgages at Barclays explains: “Swap rates, which impact funding costs for lenders tend to be volatile meaning the mortgage rates available to consumers can change…

“To avoid missing out, we are encouraging customers to move quickly and consider how they could benefit from our new rates, available for a limited time.”

How to take advantage of the low rates

It’s a good time shop around as rates are likely to be lowered by other lenders, not just the big banks, also make sure to check the APR as well as the initial rates.

  • Remortgaging? This could be a good opportunity to substantially reduce your monthly repayments, however make sure the amount you stand to save is going to be less than the booking fee you will be charge to switch.
  • First time buyer? Whilst this is good news for all borrowers and rates have been lowered for most mortgages offered, these historically low rates are mainly being made available to those with bigger deposits.