First five-year fixed mortgage under 4% since mini-budget launched by HSBC | Mortgage rates

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

HSBC has repriced its range and introduced a new five-year fix at 3.99% for customers remortgaging who are looking to borrow up to 60% of the property’s value. It means people are able to 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 to a deal of that length.

David Hollingworth, an associate director at the broker L&C Mortgages, said the last five-year deal to offer a rate below 4% was withdrawn in early October.

“The pace of rate cuts has accelerated this year,” he said, adding that although those coming to the end of a fixed rate that was 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”.

An L&C analysis found that the average of the top 10 lenders’ lowest two- and five-year fixed rates had dropped by more than 1.2 percentage points between November and the end of January.

Hollingworth added: “The thought of being able to fix at a rate lower than base rate would have sounded like dreamland in recent months. But despite base rate continuing its upward trajectory, fixed rates have been falling.”

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

Steven Morris, a director at the Bristol-based broker Advantage Financial Solutions, said the pricing changes 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.”

Many brokers have been reporting a big jump in interest in base rate tracker mortgages from people betting that interest rates have peaked.

Some are advising clients who are buying a home or remortgaging to take out a tracker mortgage with no early repayment penalties for the time being, and then switch over to a fixed-rate deal once the pricing on these has settled down in a few months’ time.