UK high street banks launch their lowest fixed-rate mortgage deals ever

the HSBC bank branch in Edinburgh

Mortgage rates have dropped steadily throughout 2021, as lenders have battled for customers in a tough, low-interest environment.

The first sub-1% deals started appearing in June, with HSBC introducing a 0.99% two-year fixed-rate deal  for the first time since 2016. Nationwide also started offering the same rate on their two-year fixed deal.

But now, HSBC has taken this to an even greater extreme, cutting down the offer to 0.94% for all potential borrowers, depending on equity or the size of a deposit.

Read on to find out whether these sub-1% deals could be appropriate for you.

HSBC launches its cheapest ever loan

Launched in July, the brand-new 0.94% deal is HSBC’s cheapest ever rate, both in the UK and in its branches around the world.

However, the key restriction to this deal is that it’s only available at 60% loan-to-value (LTV). That means you require a minimum 40% deposit to be accepted for the deal, or equity in an existing property of at least 40% of the value.

In real terms, to purchase a house at the average price in Scotland of £173,961, you would need a deposit of just over £69,500.

There’s also a product fee of £999, taking the total amount you’d need upfront to just over £70,000.

You can get a “fee-saver” version of the deal, removing the £999 charge. However, this will land you with a higher interest rate of 1.14%.

Deals for remortgagers

As of 19 August 2021, there are other sub-1% deals available for those looking to remortgage.

TSB offers a two-year fix 0.94% deal for remortgagers with the same equity requirements of 40% of the value of the property. This deal comes with a £995 product fee.

Meanwhile, Halifax has starting offering even cheaper deals for remortgagers, featuring a two-year fix at 0.83% and a five-year fix at 0.98%.

Both of these deals include product fees of £1,499 and are only available via a mortgage broker. As with the other deals, you must remortgage at 60% LTV.

Harsh criteria for sub-1% deals

Of course, to be eligible for these deals, you will still have to meet the lender’s credit scoring criteria.

Quoted in FT Adviser, Katie Cave, a director at Clearpoint Finance, notes that “anyone with debt, or with less than a perfect credit score, is unlikely to be able to borrow below 1%.”

This means, even if you’re able to afford the high deposit requirements and the costs of upfront fees, a poor credit score may still mean that you won’t get accepted for the deals.

Work with us

It’s worth remembering that, while it’s important, the interest rate on your mortgage deal is not the only factor you should pay attention to.

If you’d like to find out whether these sub-1% deals could help you buy a home, or switch your existing mortgage, please get in touch with us at Edinburgh Mortgage Advice.

We’ll give you advice that’s suited to you and your personal mortgage needs.

Email [email protected] or call 0131 339 2281 to speak to us.

Please note:

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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