HSBC launches 1.99% discount mortgage

Published 12th Mar 2010

Smaller arrangement fee means HSBC's discount mortgage is market leader


HSBC is offering a market beating discount mortgage with a rate of 1.99% from Monday.

The loan, set at a discount of 1.95% from its standard variable rate (SVR) of 3.94% for two years, has a £999 arrangement fee and is available up to 60% of a property's value.

Richard Morea of mortgage broker London & Country said the mortgage is good value, beating those with lower interest rates over the two-year period because of a smaller arrangement fee.

He calculates that a 25-year £150,000 HSBC repayment loan would cost £635 a month based on current rates. This means the borrower would pay £15,240 over the two years of the deal plus the £999 fee, producing a total of £16,239.

However, the same borrower taking out an Alliance & Leicester tracker mortgage set at 1.34% above the base rate would pay £624 a month. This would lead to lower repayments of £14,976 over the two-year deal period, but because the fee is 2% of the mortgage (£3,000) the borrower would pay a total of £17,976 – a difference of £1,737.

Morea said the difference would be even bigger if the borrower took out the maximum £250,000 available on this loan from HSBC. But he added that the A&L loan allows a higher loan-to-value of 70% and mortgages are available up to £750,000.

He added: "Tracker loans are completely transparent. If the base rate goes up the tracker rate will go up by the same amount. But discount rates are linked to the SVR and some lenders have been raising these in recent months, even though there has been no change in the base rate. The interest rates for this type of mortgage are therefore more cloudy."

However, HSBC spokesman James Thorpe said: "I have had it on good authority from our mortgage guys that we have no intention of doing that. We don't have the same funding pressures that other lenders are under."

Source: ' Guardian '

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