HSBC launches lowest five-year fixed rate mortgage ever

Mortgages and Home

Updated on 20 April 2015 | 0 Comments

HSBC is launching the first ever five-year fixed rate mortgage at less than 2%.

HSBC has launched the cheapest ever five-year fixed rate mortgage.

The mortgage comes with a fixed interest rate of just 1.99%, and is available at 60% loan to value (LTV), so you need at least 40% of the value of your home in a deposit or equity. It has a booking fee of £1,499.

Five-year fixed mortgages are great for extra peace of mind as you know exactly what you will be paying each month for a long period. However, you'll be paying more of a premium for it in higher rates. For an initial term that's a bit cheaper, have a look at two- and three-year deals over on The best fixed rate mortgages.

Let's take a look at how the new HSBC deal compares to other five-year deals which also require a 40% deposit.

Lender

Interest rate

Mortgage fee

HSBC

1.99%

£1,499

Platform

2.24%

£1,499

The Co-operative Bank

2.24%

£1,499

First Direct

2.28%

£1,450

Norwich and Peterborough BS

2.28%

£1,295

Head over to the loveMONEY mortgage centre to see which deals you qualify for

How it stacks up

But is a low rate really all that it's cracked up to be? 

Let's see how the HSBC really compares in terms of cost. I'm going to use the example of a £120,000 mortgage 60% LTV on a £200,000 property, over a 25-year term.

With HSBC's 1.99% mortgage, you'll be paying out £511.60 a month. Over the initial five-year fixed rate period, you'll end up paying £32,195 including the mortgage fee.

With Tesco Bank, you can get the same mortgage at 2.39% with a tiny mortgage fee of just £195. That comes to a monthly payment of £535.95, so over the fixed term you'll pay £32,352 including the fee. So HSBC does work out cheaper, but only just. On smaller mortgages it will actually cost you less than the HSBC deal.

This reinforces the fact that it's crucial that you do your sums when working out which mortgage to go for, rather that just going straight for the smallest rate!

Head over to the loveMONEY mortgage centre to see which deals you qualify for

More on mortgages:

The best tracker mortgage rates

The best fixed rate mortgages

How to avoid getting gazumped

Cut your mortgage costs

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