The rate cut applies to its two-year fixed rate with an arrangement fee of £999. A smaller rate cut has been applied to the bank’s no fee equivalent reducing the deal by 0.20 per cent to 2.89 per cent.
A host of rate reductions have been applied to the bank’s interest rates between 80 per cent and 90 per cent LTV, including remortgages. The highest, at 0.15 per cent, applies to a 90 per cent no fee two-year fixed rate now priced at 2.09 per cent.
Eleanor Williams, finance expert, Moneyfacts, said: “It seems as though the fixed rate war may have started to extend up the loan to value ladder which will be great news for those with smaller levels of deposit or equity.
“However, it remains the case that prospective borrowers should not be swayed by a temptingly low initial rate alone. It is important to compare the different options available and ensure that they consider the overall, true cost of the whole package a new mortgage deal offers. Balancing the initial rate against any outgoings they might incur such as associated fees, but also taking into account any incentives that might be available to them. HSBC’s new 2.69 per cent two-year fixed rate is the lowest initial rate on offer today within the 95 per cent loan to value sector according to our records, however, its deal at 2.89 per cent with no arrangement fee which when assessed as a total package secures a position in our Moneyfacts Best Buy tables for first-time buyers.”
Williams added that the lowest rate deals may suit borrowers with a larger mortgage so it was important to speak to an independent adviser to navigate the various mortgage options to make the best choices for their own circumstances.
Falling rates
First-time buyers with a five per deposit have seen the cost of fixed rate mortgage deals gradually fall every month since December 2020 when the average 95 per cent deal cost 4.2 per cent, according to the Bank of England’s quoted rates series.
By August, the average two-year fixed rate at 95 per cent LTV had fallen to 3.37 per cent. And according to Moneyfacts, rates in the highest LTV bracket have continued their descent during September, standing at 3.36 per cent mid-way through the month.
A first-time buyer with a mortgage of £200,000 over 25 years who took an average priced five per cent deposit mortgage in December would have paid £1,078 per cent a month. Over two years, including a £999 fee, the cost of the mortgage would be £26,871. Borrowers taking a 95 per cent LTV deal priced at 2.69 per cent with a fee of £999 would save £162 a month, by comparison, and pay £3,888 less over two years.
Chris Sykes, associate director and mortgage consultant, said: “High LTV rates have steadily been coming down over the past months. It’s a decision that a lot of lenders are having to make as their low loan to value rates hit rock bottom at the other end of the market.
“I don’t think we’ll see a similar rate war in this space but I believe 95 per cent rates will steadily continue to decline over the coming months. It’s a great time for first-time buyers to review their options again and possibly move forward in the near future, where plans may have been on hold.”
