Loan follows Yorkshire’s 10-year mortgage and comes as part of wider push by lenders towards lower-rate, longer-term deals
A five-year fixed-rate mortgage with an interest rate of under 2.5% is available for the first time ever as rates on new home loans continue to tumble.
HSBC has launched a five-year home loan with an interest rate of 2.49% for homeowners with a 40% deposit or for those with the equivalent equity in their property for a remortgage. The loan comes with a £1,999 fee and can only be taken out directly from the bank, not through brokers. Early repayment charges start at 5% in the first year and fall by one percentage point each year. The deal will be available from Monday.
It is part of a wider push by lenders towards lower-rate, longer-term mortgage deals. On Friday, the Yorkshire building society launched a 10-year fixed-rate loan at 3.99% with just a £130 fee to pay. Earlier in the week data provider Moneyfacts said the number of five-year fixed-rate mortgages launched in the past year has increased by 73%. By comparison, the traditionally popular two-year fix has only increased by 33%.
Interest rates on the five-year loans have also tumbled, so that the rate difference between the average two-year and five-year fixed rates, on a 75% loan to value mortgage, is just 0.04%.
“Borrowers have become far more interested in five-year fixes this year as they really seem to be the value buy in the market at present,” said Andrew Montlake of mortgage brokers Coreco. “This reduction by HSBC below 2.5% creates another milestone – and although I believed we would see rates this low some time this year, it has occurred a lot quicker than many envisioned.”
The HSBC deal may not be the best bet for everybody looking for a five-year fixed rate. Although it comes with a low rate, some borrowers with small mortgages may be better off over the term of the mortgage with a higher rate and lower fee. After HSBC, the lowest five-year fix on rate is Yorkshire building society at 2.59% at 60% LTV. This comes with a £1,475 fee. Norwich & Peterborough building society has a five-year fix at 2.74% at 60% LTV with a much lower fee of