HSBC fires 10% mortgage salvo

At long last there’s some seriously good news for people trying to hunt down a competitively priced mortgage.

It is especially heartening news for first time buyers and for those who can only raise a 10 per cent deposit.

Property experts are wondering if HSBC’s move will now trigger a lending war.

It is – perhaps – one of the first fruits to come out of the Bank of England’s high-risk strategy of continually slashing bank rates. Today the BoE held bank rate at its record low of 0.5 per cent.

HSBC has cut hard into loan rates for those buyers who can raise only a small deposit. To date this has been one of the biggest brakes on the housing market.

It could bring back into the property sector the first-time buyers. Their re-entry could be the spark which lights up the property sector.

HSBC is offering a tracker deal at 4.59 per cent for those with a 10 per cent deposit. It is also offering a fixed-rate deal for two years at 4.99 per cent for a 10 per cent deposit.

The two-year fixed deal has a £1499 arrangement fee but both deals are considerably cheaper and more competitive than those offered by rivals.

There is a catch. Anybody who signs up to one of the HSBC deals must also sign up for one of its new fee-paying current accounts costing £12.95 every month.

But even when this is included repayments on an average size loan seriously undercut any of the offerings from rival lenders.

The monthly repayments on a typical £150,000 mortgage work out at £854 for the 4.59 per cent tracker with a 10 per cent deposit.

Monthly repayments on the 4.99 per cent two-year fixed deal work out at £889. Tha include the current account fee that is necessary.

The move by HSBC could trigger a cut-price mortgage war but lenders will be wary not to let it get out of control – a root cause of the present recession.