First mortgage below 4pc since mini-Budget as price war heats up

Mortgage 4pc
Mortgage 4pc

The first five-year mortgage deal below 4pc has been launched since the mini-Budget, as a price war breaks out between lenders.

HSBC has reduced interest rates on 130 of its mortgages and now offers a remortgage deal fixed at 3.99pc for five years, available to borrowers with a 40pc deposit.

It is the first five-year deal to be priced below 4pc since early October, before interest rates soared as markets panicked in the wake of the mini-Budget.

Five-year fixed rates peaked at around 6.5pc towards the end of October and have steadily declined since markets calmed. Fixed rates are forecast to fall further in the coming weeks as a price war between banks heats up.

David Hollingworth, of broker L&C Mortgages, said HSBC’s five-year deal at 3.99pc – below the current Bank Rate of 4pc – was a turning point for borrowers.

Mr Hollingworth said: “The thought of being able to fix at a rate lower than Bank Rate would have sounded like a dream land in recent months.

“These deals are beginning to offer rates that many may have feared were headed for extinction. Borrowers who understandably decided to sit on their hands when rates went through the roof last October should now seriously consider if it’s time to take advantage of these significant improvements.”

The sub-4pc deal with HSBC is only for borrowers remortgaging, but brokers expect similar rates to be available to new buyers in the coming weeks.

The next best five-year deal for borrowers remortgaging is with Lloyds, priced at 4.13pc. Last week Virgin Money reduced a five-year deal for borrowers purchasing to 4.17pc and cut a ten-year deal to 3.99pc, although longer deals are less popular with borrowers.

Adrian Anderson, of broker Anderson Harris, said: “An important psychological barrier has been broken by rates dropping below 4pc again. They will soon be available for borrowers purchasing and I’m confident other big banks will follow.

“We have clients who are keen to make an offer on properties once rates drop below 4pc, so it will boost buyer confidence too.”

The average five-year fix has fallen from a high of 6.51pc in October to 5.15pc today, while the typical two-year rate has dropped from 6.65pc to 5.43pc in the same period, according to analyst Moneyfacts.

HSBC also increased its savings rates by up to 0.55pc, with the rate on its premier savings account, for more affluent customers, almost doubling from 0.65pc to 1.2pc.