The lowest ever five-year fixed rate mortgage deal was launched by HSBC as competition between lenders for new business intensifies.

HSBC offers the 1.99% five-year fixed rate mortgage at 60% loan to value (LTV) requiring a large 40% of the property value as a deposit or equity and has an arrangement fee of £1,499.

The five-year fixed mortgage offers an extra peace of mind as you know the rate and your monthly payments will not change. The rates are however slightly higher than for the shorter terms of two and three years.

These lower rates will help first time buyers, home movers and remortgage buyers lower the cost and make it more affordable to own their home.

Five years rates now lower

For five year fixed rate mortgages the 1.99% rate from HSBC puts pressure on other lenders with TSB offering 2.09%, Co-Operative Bank with 2.24%, First Direct and Norwich & Peterborough BS offering  2.28% and Nationwide with 2.29%.

These rates require an LTV of 60% which means you need a deposit of 40% of the property value.

Bank of England data shows the average five year fixed rates are 3.05%. With HSBC breaking through the important 2.0% barrier it is likely other lenders will follow.

It is important to take into account the cost of these low five year fixed rates mortgages with the Nationwide 2.29% having an arrangement fee of only £499 compared to the £1,499 fee for HSBC.

The equity release mortgage buyer can secure fixed rates typically from 5.4% upwards without any evidence of earnings, important for borrowers with only pension income.

Competition across the market

Other rates have reduced as competition has increased in the market, especially for quality borrowers with a high deposit for first time buyers, home movers, remortgage buyers and buy-to-let investors.

There are a number of ten year fixed rate mortgages on the market under 3.0% rates.

For a two year fixed rate mortgage, one of the lowest is the Yorkshire Building Society offering 1.18%, requiring a deposit of 35% with a £1,499 arrangement fee.

The Chelsea BS offers a 1.79% three year fixed requiring a deposit of 35% with a £475 arrangement fee or 1.24% two year fixed, 35% deposit and £1,545 fee.

For remortgage buyers currently on their lenders standard variable rate, switching to a new mortgage deal would help them to reduce the cost of monthly repayments.

Lenders are also competing for borrowers with smaller deposits according to the Bank of England Credit Conditions Survey.

There is a greater willingness to lend to people with a deposit less than 10% of the property value as the demand for mortgages related to high-value properties is falling.

For first time buyers with only a 5% deposit can now find fixed rate mortgages at about 4.0% and if they have a 10% deposit the rate falls to as low as 2.7%.

What are your next steps?

Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.

For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to repay an interest only mortgage, pay for care at home or improve your quality of life.

Start with a free mortgage quote or call us and we can take your details. Learn more by using the equity release calculator, mortgage cost calculators, and property value tracker chart.

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