UK mortgage borrowers now have a choice of two loans with interest rates set at 0.94% for two years as the price war between lenders intensifies.
HSBC and TSB are offering the ultra-low rate, which is lower than the previous best buy of 0.95%, and adds to a growing number of transactions below 1% for borrowers with large deposits.
HSBC said 0.94% was the lowest rate ever offered. Her mortgage carries a fee of £ 999 and is available to homebuyers and mortgage lenders. The TSB deal, which launched last week, is only available to mortgages and has a fee of £ 995.
Previously, the cheapest offer on the market was a two-year 0.95% fixed rate from Platform, which is part of Co-operative Bank. It has a fee of £ 1,499 and is only available through mortgage brokers.
Mortgages are only available to borrowers with a down payment of at least 40%. Those with less equity will pay higher rates.
HSBC has a five-year fixed rate of 1.29% for those who borrow up to 75% of the loan-to-value ratio (LTV), while those who borrow 95% of the cost of their home can fix for two years at 3 , 39%. TSB mortgages can fix for two years at 1.09% up to 75% LTV, but this rises to 3.14% for between 85% and 90% LTV.
The rates are among the lowest ever offered and show how eager lenders are to attract borrowers.
The HSBC deal is available on loans of up to £ 5million. However, Ashley Thomas, director of mortgage broker Magni Finance, said anyone borrowing less than £ 500,000 would pay less if they accepted HSBC’s no-fee deal with a 1.14% rate.
Katie Cave, director of Clearpoint Finance brokers, warned, “Beware of buying short-term savings and losing better long-term value.