HSBC to relaunch mortgage rate matcher deal

HSBC to relaunch mortgage rate matcher deal

HSBC is relaunching its promise to homeowners to match or beat their current mortgage rate, but the deal comes with a sting in the tail: fees of up to £4,700.

The Rate Matcher mortgage is available to borrowers on deals with rates as low as 2.49% and is primarily targeting homeowners languishing on their lenders' standard variable rate (SVR), the rate mortgage deals revert to when they end.

Rather than remortgage, thousands of borrowers have been choosing to stay on these SVRs, which are as low as 2.5% and so cheaper than many fixed-rate or tracker mortgage deals.

Although there has recently been a slight increase in activity in the remortgage market, the most recent figures from the Council of Mortgage Lenders show numbers are down 45% on last year, and lenders and mortgage brokers are keen to encourage people off SVRs.

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Martijn van der Heijden, HSBC's head of mortgages, said: "One of the reasons floating mortgage rate holders have put off fixing their mortgage is that rates on offer are often 2%-4% higher than what they are currently paying. Our Rate Matcher mortgage gives these borrowers another option and enables them to fix at, or close to, the rate they are paying."

Rate Matcher, available from next Monday, will match or beat rates for anyone prepared to fix their mortgage for two to five years and wanting a mortgage of £250,000 or less worth up to 75% of the value of their home.

The lowest rate of 2.49% will only be available as a two-year fix, while the lowest rate for anyone wanting to fix for five years will be 4.24%. The bigger the size of the loan and the higher the loan-to-value (LTV) the heftier the fee.

So, someone with a £250,000 mortgage and equity of 25% wanting to fix at 2.49% for two years will pay a fee of £4,699. The fee is not much lower for someone with 40% equity in their property at £4,099.

The charge drops to £799 for someone with a 75% LTV £100,000 mortgage fixed for three years at 3.89% – a more typical scenario according to a HSBC spokesman.

"The fee is there to subsidise the rate, we are not making any bones about that," he said. "We are trying to show that you can have a rate the same or close to your lender's SVR, but people need to work out whether that is worth if for them or not."

Rate warning

David Hollingworth of mortgage broker London & Country said Rate Matcher was "on the face of it a good deal that gives you flexibility to tailor your rate". However, he added: "There is no avoiding the fact that you won't get the startlingly low rate without paying a sky-high fee."

Melanie Bien of mortgage brokers Savills described the deal as a "popular marketing tool" for HSBC and warned borrowers who fix for two years to be prepared for what could be a steep hike in payments once their deal ends.

"We expect rates to stay low for the rest of this year before rising quickly next year," she added.

HSBC first offered its Rate Matcher mortgage this time last year when interest rates looked set to rise and many borrowers were concerned about experiencing a payment shock when they came to the end of a short-term fixed or discount deal.

This time round a similar rate, but with a lower fee, is available from the Market Harborough building society at 2.89% with a £1,594 fee up to 75% LTV. Five-year fixed rates start at 4.64% up to 65% LTV with a £999 fee from the Chelsea Building Society.

From Monday, homeowners can visit the HSBC website to use the Rate Matcher calculator to compare the different fees at different interest rates. London & Country has set up a "Ratematcher" line for people who want to compare the HSBC offer to other deals in the market, on 0800 953 0309.

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