Mortgage boost with 5-year fixed deal under 4%

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One of Britain’s biggest mortgage lenders cut its interest rates on Tuesday – prompting hopes of a price war. Five-year fixed-rate deals are available again at below four percent from HSBC.

This is the first sub-four percent offer since last year’s mini-Budget by former prime minister Liz Truss and chancellor Kwasi Kwarteng sent the mortgage market into meltdown.

And the 3.99 percent home loan is a sign competitive lenders are back fighting for customers.

Gary Boakes, director at Verve Financial, said: “HSBC are the Pied Piper, now watch all the other lenders follow. This is fantastic news.”

Graham Cox, a director at self-employed mortgage specialists SEMH, said: “This deal is evidence the recent base rate hike has not affected mortgage rates adversely.

“It’s a full-on price war as lenders slug it out to maintain market share at the expense of short-term profits.”

Katy Eatenton, mortgage specialist at Lifetime Wealth Management, said: “Fixed rates are falling daily and the price war appears to be ­supporting the ­property market.”

The Nationwide Building Society also announced mortgage interest cuts from today though none sank below four percent.

The HSBC deal has a £999 fee and is available to homeowners re-mortgaging or switching rates (existing customers rolling off an old deal and on to a new one with HSBC).

The move is part of a wider range of mortgage rate cuts made by HSBC UK, following reductions in swap rates, which lenders use to price home loans.

Many mortgage deals vanished from the market following the mini-Budget last September and when they returned they were at significantly higher rates.

Financial information website said the average five-year ­fixed-rate deal offered at the start of January was 5.63 percent.

By the start of February, it had fallen to 5.20 percent.

Luke Thompson, mortgage adviser at PAB Wealth Management, said: “I had a customer last week who was able to save over £150 a month compared to the interest rate I was able to offer them back in December. The mortgage market is really starting to improve and this will eventually feed through into the property market.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “While the days of sub-one percent fixes are long gone, rates are looking more palatable for borrowers, which should be a welcome boost for the housing market and encourage more to take the plunge.”

Borrowers on variable rate ­mortgages, meanwhile, have been feeling the impacts of recent rises in the Bank of England base rate. Last week, rate setters on the Bank’s Monetary Policy Committee lifted it to four percent – the 10th successive rise – as it battles high inflation. said on Tuesday that HSBC UK is the only lender on its records offering a sub-four percent five-year fixed mortgage.

However, the website has seen below four percent rates offered on 10-year fixed deals by Virgin Money and Lloyds Bank.

David Hollingworth, associate director at broker L&C, said: “The thought of fixing at a rate lower than base rate would have sounded like dreamland in recent months.

“But despite the base rate continuing upward, fixed-rates have been falling and borrowers are now faced with a very different picture.

“Those coming to the end of a fixed-rate taken during the low rates of recent years will still be faced
with higher payments than they
have been used to.

“But it’s a far cry from the prospect of rates at six percent or more.

“These deals are beginning to offer rates that many may have feared were headed for extinction.”

Steven Morris, director at Advantage Financial Solutions, said: “There’s light at the end of the ­tunnel. Every time we apply for a fixed-rate for a customer, within no time it’s cheaper elsewhere.”

Houses prices ”set to fall by 20%”

Homeowners have had £12,000 wiped off their properties since the summer, says a mortgage lender.

In August, a three-bed semi peaked in value at £293,992, according to the Halifax.

But last month it was worth only £281,684, about the same as in December.

Property values increased by 1.9 percent annually to January – the lowest rise recorded over the past three years.

The lender said there was no month-on-month house price growth in January, following decreases of 1.3 percent in December and 2.4 percent in November.

Graham Cox, founder of the Bristol-based speciality broker, predicts falls of between 15 and 20 percent this year.

He said: “Mortgage rates are likely to remain, at best, double what they were in late 2021, making affordability extremely difficult for many.

“About 1.2 million mortgage holders will be remortgaging on to those much higher rates this year.

“Landlords are selling up in droves either because it’s no longer profitable or they can’t refinance, or both. And we’re heading into a recession. All these factors will put downward pressure on prices.

“The good news for first-time buyers and those looking to buy a bigger home, is house prices are falling fast and are likely to continue falling well into next year.”

However, Tom Bill, of estate agent Knight Frank, was more positive about the market.

He said: “Some discretionary demand has disappeared but most buyers need to move and have accepted the fact that a 13-year period of ultra-low rates is over.

“As budgets adjust to higher rates, we think prices will fall by five percent this year but offers are still exceeding the asking price in some areas.”

The slowdown in annual house price growth is reflected in most nations and regions across the UK, Halifax said.

Kim Kinnaird, Halifax Mortgages director, added: “Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home-buying affordability over time.”

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