A growing number of mortgage lenders have begun to offer interest rates below one per cent, leading to claims that the market is facing a rate war.
Several banks and lenders are already dropping their rates to attract homebuyers and those seeking a remortgage, with both HSBC and Nationwide now offering mortgage rates below one per cent.
HSBC was the latest to do so, cutting the rate on its two-year fixed mortgage product for borrowers with equity or deposits of at least 40 per cent by 0.05 percentage points – bringing the overall rate to just .99 per cent.
This made it the first sub-one per cent deal the lender has launched since 2016.
This has since been followed by Nationwide Building Society, which announced a 0.99 per cent two-year fixed-rate mortgage to the same type of borrowers.
In both instances, a fee applies (£999 in HSBC’s example and £1,499 for Nationwide), which could increase the costs of arranging a mortgage.
One of the lowest mortgage rates made recently available is from The Co-operative Bank’s intermediary lending arm, Platform, which cut the rates on its 40 per cent deposit product to just 0.95 per cent.
A slew of lenders also now offer 0.99 per cent rates, including TSB, Santander, and Hinckley & Rugby Building Society, while Cumberland Building Society has a rate of 0.98 per cent.
Rachel Springall, a finance expert at Moneyfacts, has warned that “these rates don’t tend to last long and often have a shelf life”.
Moneyfacts previous data show that sub-one per cent fixed rates came onto the UK market in April 2017, and by October they were no longer available.
“We’re not talking about a long sustainable period,” said Springall. “We’re talking about a quick bout of excitement.”
These rates may be short-lived given the changes to the Stamp Duty Land Tax holiday from this month and rising inflation.
Finding a better mortgage deal is one way that savers can reduce their monthly outgoings to free up cash to invest elsewhere.
If you think you may be paying too much on your current mortgage deal then it may be time to seek independent financial advice.