HSBC launches best buy 3.98% fixed-rate mortgage deal – but there’s a BIG catch…

HSBC has launched the lowest fixed rate mortgage on the market, but it will only be available to a select few.

The 3.98 per cent five-year fix comes with a £999 product fee. A £200,000 mortgage would cost someone £1,053 a month, based on a 25 year repayment term.

Last week, Santander withdrew its 3.99 per cent five-year fix following high demand.

After HSBC, the next lowest five-year fixed rates on offer among the biggest banks are 4.08 per cent with Santander or 4.09 per cent with Barclays.

HSBC’s 3.98 per cent deal is unlikely to be inundated with applications due to the tough eligibility parameters.

For a start, it is only available to customers who are HSBC Premier banking customers.

Statement: HSBC is offering the lowest fixed rate on the market but it will only be available to a select few

To qualify as a premier customer borrowers will need to have an individual annual income of at least £100,000 and pay it into an HSBC Premier Bank Account, or have savings or investments of at least £100,000 with HSBC in the UK.

While the deal is available to first-time buyers and home movers, many will find the minimum deposit requirement of at least 40 per cent is too large to meet. 

As for households remortgaging, the rate is marginally higher at 3.99 per cent and borrowers will also need to be a premier customer and have at least 40 per cent equity in their home.

For the majority of borrowers unable to meet the high bar set by HSBC in this case, there are plenty of deals that are almost as good.

HSBC is offering a 4.07 per cent five-year fix for those with the biggest deposits who are not Premier Banking customers.

Meanwhile Santander continues to offer its 3.99 per cent, but only via a two-year fix – and this comes with a hefty £1,999 fee.

For those buying with a 25 per cent deposit, it’s possible to get as low as 4.24 per cent on a five-year fix, and for those buying with a 10 per cent deposit, rates start from 4.67 per cent.

Aaron Strutt, of mortgage broker Trinity Financial, said: ‘Just when we thought it was all over for sub-4 per cent fixes for a while, HSBC has topped the best buy table with a 3.98 per cent five-year fix. 

‘While the rate is really good, it is not going to be as widely available to borrowers because of the high minimum income qualification requirement. 

‘The good news is that HSBC’s move shows the lenders can still offer really cheap mortgages despite the ongoing uncertainty driven by inflation and mixed messaging about the number of base rate cuts we will get this year.

‘There is a selection of lenders offering five-year fixes around 4.1 per cent.’