This is the lender’s first ever 90% LTV mortgage below 4% and is available to all borrowers with a 10% deposit, not just first-time buyers.
In addition, HSBC has launched a five-year fixed rate at 3.28%, with a £1,999 booking fee, and a lifetime tracker at 2.39% above base, current pay rate 2.89%, with a £999 booking fee, both up to 60% LTV.
The 90% LTV mortgage comes with a free valuation and has a tapering early repayment charge, initially at 2%, reducing gradually to 1% by the end of year one and zero by the end of year two.
While the 90% deal’s interest rate will move in line with HSBC’s SVR, a spokesperson for the lender said it has no plans to alter its SVR unless Bank base rate changes – something experts are not predicting will happen until 2013 at the earliest.
Jonathan Cornell, communications director at First Action Finance, said: “This is a breathtaking and phenomenally competitive rate. It’s great news for people trying to get high LTV mortgages.
“The drawback is that base rate will not stay where it is forever. I’m sceptical of a lender that says it won’t put up SVR, because it could have just made it a tracker.”
In comparison, Moneyfacts figures show that the lowest 90% fixed rate mortgage is a four-year deal from Leek United Building Society at 3.99%, with a £995 fee, while the lowest variable rate deal is a three-year discount from Loughborough Building Society at 3.99%, with a £499 fee.
Peter Dockar, head of mortgages at HSBC, said: “We are committed to supporting first-time buyers and last month we pledged to make a further £350m available to borrowers with equity or a deposit of 10% to 15% by the end of the year.
“We recognise that first-time buyers need help so, as well as great rates with no fee options, we offer our customers a free mortgage advice service in branch to help them get the right deal for them.”
Cornell added: “Whilst it’s disappointing HSBC does not choose to use brokers, no one can question its commitment to price competitively at high LTVs; it is leading the way. Yet, it would be interesting to know how many people who apply for it, get the deal.
“I don’t think we will see any other lender trying to compete, because HSBC funds almost all of its mortgages from its savings book and not wholesale funding.”
Rachel Springall spokesperson for Moneyfacts.co.uk, said: “Although the number of 90% loan-to-value mortgage deals has risen, from 101 in November 2009 to 253 today, high rates and fees for these deals has meant they were often too costly for many struggling first-time buyers.
“This deal is an exciting and fresh addition to the high LTV mortgage market and should prove popular with many borrowers looking for a competitive variable rate mortgage.”
