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First 5 year fixed mortgages since mini-budget launched

Five-year fixed-rate mortgages priced below 4% are back on sale for the first time after the disastrous autumn mini-budget.

HSBC has repriced its range and introduced a new five-year fix at 3.99% for remortgaging customers looking to borrow up to 60% of the property’s value. It means people can fix their monthly home loan costs at a level below the Bank of England base rate, which rose to 4% last Thursday.

Kwasi Kwarteng’s mini-budget on 23 September last year unleashed chaos in the financial markets and helped push the price of many new fixed home loan deals above 6%.

However, over the past couple of months, lenders have been gradually reducing the cost of their new fixes, and some mortgage brokers have gone as far as to claim there is a “price war” between lenders, with lower rates appearing daily.

In testimony to MPs on Tuesday, HSBC chief executive, Ian Stuart, contrasted the current sub-4% rates with the situation in December, when 60,000 HSBC borrowers were facing levels of 7%. “If you heard the strain in our customers, the anxiety in our customers was palpable,” he told the Treasury select committee.

Late last week, Virgin Money launched a 10-year fixed-rate mortgage priced at 3.99%, though many people are not keen to sign up for a deal of that length.

David Hollingworth, an associate director at the broker L&C Mortgages, said that although those coming to the end of a fixed rate taken out when deals were at record lows would still be faced with higher payments, “it’s a far cry from the prospect of rates at 6% or more”.

The pricing of new fixed deals is primarily determined by money market “swap rates”.

Steven Morris, a director at the Bristol-based broker Advantage Financial Solutions, said the pricing changes in mortgages were proving a challenge for his profession.

“Every time we apply for a fixed rate for a customer, within no time, it’s cheaper elsewhere,” he said. “I am currently on application number six for the same client in a bid to get them the best deal.”

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