HSBC offers 1.99% mortgage

HSBC will launch a market-leading mortgage priced at 1.99% on Monday.

The deal is a discount of 1.95% off HSBC’s Standard Variable Rate (SVR) of 3.94% for two years, and comes with an arrangement fee of £999.

However, it is only available to borrowers with a 40% deposit to put down, and the maximum advance is £250,000.

HSBC launched exactly the same product last September, and it was hugely popular, selling over £10m worth of mortgages every day it was on sale.

Richard Morea of mortgage broker London & Country believes the deal represents good value compared to Base Rate trackers charging lower rates as they tend to come with higher fees.

He calculates that a 25-year £150,000 HSBC repayment loan would cost £635 a month based on current rates. This means the borrower would pay £15,240 over the two years of the deal plus the £999 fee, producing a total of £16,239.

The same borrower taking out an Alliance & Leicester tracker mortgage set at 1.34% above the Base Rate would pay £624 a month. This would lead to lower repayments of £14,976 over the two-year deal period, but because the fee is 2% of the mortgage (£3,000) the borrower would pay a total of £17,976 – a difference of £1,737.

However, it is worth noting that the A&L product allows people to borrow up to £750,000.

Morea said: "Tracker loans are completely transparent. If the base rate goes up the tracker rate will go up by the same amount. But discount rates are linked to the SVR and some lenders have been raising these in recent months, even though there has been no change in the base rate. The interest rates for this type of mortgage are therefore more cloudy."

However, HSBC spokesman James Thorpe said:

"I have had it on good authority from our mortgage guys that we have no intention of doing that. We don't have the same funding pressures that other lenders are under."

For borrowers with a 30% deposit, HSBC is offering a second two year discount mortgage at an interest rate of 2.94% and a booking fee of £499.