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15 April 2008 HSBC tried to steal a march on rivals last week by offering to match borrowers’ cheap, two-year deals when they remortgage.The offer applies only on loans of £250,000 or less, and there may be a hefty fee of up to £5,000. The effect of the fee is that those with large loans are likely to be better off elsewhere. For those with smaller loans, the offer looked good value on Friday, but mortgage rates are changing fast and that may not be the case by the end of the week. HSBC’s head of mortgages Martijn van der Heijden said: “Many homeowners are worried about their monthly repayments going up and we can help take away that anxiety.” The bank does not intend to make a loss on the scheme, which runs for five weeks from tomorrow. “HSBC will make money on every mortgage sold,” it said. Furthermore, HSBC has fixed the minimum rate it will match at 4.54% - therefore hundreds of thousands of homeowners who took out rates as low as 4.3% in 2006 will still face some repayment shock. Melanie Bien of broker Savills Private Finance, said: “This is a very clever marketing ploy, but it could end up doing more harm than good.” She advised borrowers to get a quote from HSBC, then see how the deal stacks up. She said: “You’ve only got five weeks and there are bound to be service issues that hold up your application. Whatever you do, make sure you have time to compare this deal with others on the market.” Early last week HSBC’s deal was the cheaper option only for those with mortgages under about £150,000 as the next-best fixed rate on the market was just 0.45 percentage points above HSBC’s at 4.54%.However, when the HSBC deal is launched tomorrow the cheapest fix will have risen to 0.95 points above its rate-matcher, making it the cheaper option for most loans below £250,000.Q A homeowner with a £120,000 mortgage would pay an arrangement fee of £1,999 for HSBC’s 4.54% rate. Monthly repayments would be £669 and the cost £18,055 over the two-year term.Those that miss out on this deal could go for the next best two-year fix on the market from Mansfield building society at 5.5% with a fee of £999. Monthly repayments on that deal would be £736 with a total cost of £18,663, £608 above HSBC. Borrowers with a £250,000 mortgage will do better overall to bypass rate-matcher for HSBC’s discount deal at 5.43% with a fee of £999. Monthly repayments on the discount are £1,524 – higher than the rate matcher option at £1,395. However the total cost with fixed-rate deal will be £38,479 if the fee rises to £4999 – £904 more than with the tracker over two years. HSBC reserves the right to increase the maximum upfront fee for a loan of £250,000 at the 4.54% rate to £4,999. For borrowers with mortgages above £250,000 HSBC offers the rate-matcher and then an option to “top-up” with another HSBC mortgage to cover the remainder of the loan, however you will have to pay two arrangement fees. The best fix available with HSBC outside of its rate-matcher range is 6.23% – higher than other fixes on the market although this has no fee. If you had a £500,000 loan with £250,000 on rate-matcher at 4.54% and the other £250,000 on the discount, your monthly repayments would be £2,919 and total cost £74,754 over two years – including £4,698 in fees paid upfront. Monthly repayments for the rate-matcher and the fix would be £3,041 and the cost would be £77,682 over two years. However, a £500,000 deal on the Mansfield fix would be £3,070 a month or £74,679 overall including the fee: £75 cheaper than the HSBC tracker over two years and £3,003 cheaper than the fix.Ray Boulger of broker John Charcol said: “Other lenders such as Cheltenham & Gloucester give people a choice of a bigger fee and a lower rate.” |
