HSBC is to join the Help to Buy ranks this week, undercutting other major lenders participating in the scheme.
The bank’s new range of 95% loan-to-value mortgages will include a 2-year fix at 4.79%, and a 5-year fix at 4.99%. Both products require a £99 booking fee.
These deals comprehensively outperform the two major banking groups currently signed up to the Government scheme.
Halifax and the Bank of Scotland (Lloyds Banking Group) have both offered a 2-year fix at 5.59% with no fee, or a 5.19% deal with a £995 fee. (How do I work out the best rate / fee relationship?)
RBS and NatWest are both offering a more competitive 4.99% for two years, and 5.49% for five years, with no fees involved.
But a borrower seeking a £150,000 mortgage for two years would save £318 with the new HSBC deal over RBS or NatWest, and a whopping £1,595 on the Halifax deal.
Competition
Heated competition in the market for low-deposit mortgages has not been restricted to the Help to Buy scheme, however.
A host of new 95% mortgages was made available last week by the Yorkshire Building Society and its associated brands (read more).
The Yorkshire Building Society unveiled a 2-year fix at 4.89% (£130 fee), which is now undercut by HSBC. On a £150,000 mortgage, HSBC would be £239 cheaper over the cost over the deal period.
However, the sting in the tale is Yorkshire’s £500 cashback offer, which makes the mutual's deal the cheaper of the two on this occasion.
Local Lenders
HSBC is also outperformed by select local lenders for its longer 5-year fixed-rate deal.
The Furness Building Society, based in the North West and Cumbria, is offering a 5-year 95% mortgage at just 4.75% with no fee. Unfortunately, the mortgage can only be applied for in-branch, which will limit its appeal to those who live in the region.
The Loughborough Building Society also matches HSBC’s rate and fee (4.99% / £99) over five years, though a low maximum loan size of £150,000 limits the number of eligible properties.
The deals show how smaller lenders and mutuals are making banks work harder to make their Help to Buy deals more competitive.
And while it is useful for first-time buyers that another major bank has entered the fray, undercutting its rivals in the process, there are still some local and potentially cheaper alternatives available.
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