HSBC unveils cheapest ever five-year fixed mortgage

HSBC has shaken up the fixed-rate mortgage market today with the launch of a record low five-year deal.

But how good is this deal, and what do borrowers need to watch out for?

The deal

HSBC is offering borrowers able to stump a 40% deposit a fixed rate of 2.99% for five years – the lowest five-year fixed rate ever recorded. 

To get the deal you have to pay a £1,499 booking fee, and should you wish to switch to another lender before the end of the five years you will be hit with early repayment charges – 1% of the remaining balance for each year left of the mortgage.

However, if you move house within the five years, you will be able to port your mortgage to another property, though this will depend on the property you move to.

Is it a good deal?

If you qualify for it then it is a very good deal, according to Ray Boulger, of mortgage broker John Charcol.

Not only is it way ahead of the next cheapest five-year fixed-rate deal – 3.69% from Nottingham Building Society – it’s also cheaper than most tracker deals on offer.

What’s more, with the Bank of England base rate unlikely to fall any further, Boulger said, locking into such a low rate for five years isn't a bad idea, and you will get the peace of mind you don't get with a variable tracker mortgage.

Also, although choosing whether or not to lock into a five-year fixed rate deal depends on your individual circumstances, it’s hard to see you ever being unhappy with a 2.99% deal, David Hollingworth of London & Country Mortgages said.

By the same token borrowers should remember that it is a fixed deal for five years and there are early repayment charges, so if you can see your circumstances changing sooner, then it might not be for you.

First-time buyers should turn away now

HSBC’s new rate is ‘clearly not aimed at the first-time-buyer market,’ Boulger said. A shame given the struggle new buyers are experiencing when trying to get a foot on the property ladder.

But with the average UK house price currently £229,000, according to the latest figures from the Office for National Statistics, HSBC’s requirement for a buyer to find a 40% deposit means they would have to pay £91,600 up front – plus the £1,500 arrangement fee.