HSBC has scrapped its 0.99% two-year fixed interest rate after six months, suggesting that the recent period of record low fees could be coming to an end. The bank also announced it is raising fixed rate fees by between 0.1% to 0.5%. An HSBC spokesman said: “When the cost of funding comes down we are […]
HSBC has scrapped its 0.99% two-year fixed interest rate after six months, suggesting that the recent period of record low fees could be coming to an end.
The bank also announced it is raising fixed rate fees by between 0.1% to 0.5%.
An HSBC spokesman said: “When the cost of funding comes down we are always quick to pass on the benefit to customers, and we have been able to do that for almost six months with our 0.99% rate mortgage. The cost of funding has gone up over the last month or so and we have had to reflect that in our recent pricing review.
“We regularly review our rates, and while they still provide good value for those looking to move onto or up the housing ladder, should the cost of funding come back down you can be sure we will reflect that with some great deals.”
The 0.99% two-year fix was launched in June and is the lowest since records began.
Since the financial crisis in 2008 mortgage rates have steadily fallen.
The Bank of England cut interest rates in August from 0.50% to 0.25% – the lowest on record and the first interest rate cut since 2009 when the financial crisis was at its peak.
Research from Moneyfacts.co.uk has found that the average two-year fixed rate fell by 0.04% in October to stand at 2.34%, a new record low.
Rachel Springall, finance expert at Moneyfacts, said: “These record low rate mortgages were never going to be around forever and HSBC’s decision to scrap its 0.99% deal and raise other rates could give other lenders the green light to change their own range. HSBC first offered the sub-1% fixed deal in June, so it has been around a reasonable amount of time for borrowers to consider.
“First direct are now offering the lowest fixed deal priced at 1.09% for two years for borrowers with a 40% deposit, which is followed by Yorkshire BS priced at 1.17% for those with a 35% deposit.
“Lenders still have an appetite for borrowers, but with economic uncertainty there could be a slowdown in competition and some rates could well start to rise up from their current lows.
“It is still the time of year where lenders aim to meet their lending targets and assess which deals to bring into the new year, so we can’t rule out some attractive low rate deals coming into play before 2017 arrives.
“We might see a spike in competition in the spring as lenders get ready to entice new buyers looking to move or buy their first home, so it’s always worthwhile for buyers to compare deals in preparation.
“Low rates are tempting but borrowers would be wise to choose a deal based on the overall true cost and not on rate alone to find the best deal for them.”
Adrian Gill, executive director of Your Move & Reeds Rains, said: “Whilst HSBC’s decision to pull its 0.99% fixed rate product may signal that the mortgage market has finally bottomed out, this may well be the stimulus that the housing market needs.
“This rate change could spur homeowners into action. Those that have been happy sitting for years on their lender’s SVR as rates continued to decline will be now be stepping back and reassessing their options, potentially with a view to remortgage.
“As these historically low rates show their first signs of abating, homeowners could also be tempted to move up the housing ladder, locking in a fantastic deal now, while they still can. In-branch advisers and brokers are well placed to help with this decision, as they’ll have a good view of the current deals available across the market.
“If there is a rush of new purchasers, this combined with endemic levels of short supply, could well cause prices to re-ignite in the New Year.”
