The loan is designed to appeal to customers facing the dilemma of whether to keep tracking to preserve the flexibility to make overpayments, or benefit from the security of locking into the historically low fixed mortgage rates.
From today, customers will be able to choose to fix 25, 50 or 75% of their loan, with the remaining percentage on a lifetime tracker, at exactly the same rate as the fixed proportion. The actual interest rate will depend on the proportion of the mortgage which is fixed and the LTV of the mortgage. The mortgage deal has only one booking fee of £999 which covers the fixed and tracker loans and is available to customers looking to borrow up to £500,000.
With the current Bank of England base rate at 0.5% and signs that the economy is improving, the uncertainty of whether to fix or not to fix is mounting. This uncertainty is not helped by the lack of consensus among economists' predictions, with the differing extremes of the base rate increasing from this month (April 2010), to no increase until mid 2011.
Martijn van der Heijden, HSBC's head of mortgages, said: "It is impossible to predict exactly when interest rates will start to rise and borrowers are facing the potentially costly dilemma of whether they should fix or take advantage of the historically low rates with a variable mortgage. Our consumer research shows many households on trackers or standard variable rates feel they should lock in some of the benefit of the low base rate but are not sure how or when."
Andrew Hagger of Moneynet.co.uk, believes the move should be applauded. He said: “The rates on offer are very competitive, but the higher the fixed portion, the higher the overall rate becomes, and this is not surprising as it mirrors current pricing patterns in the mortgage market as a whole.
“A 75% fixed/25% tracker deal is priced at 2.99% for 70% LTV and 3.89% to 80% LTV, with rates as low as 2.49% for the 25% fixed/75% tracker 70% option.
“This product also gives borrowers the option to pay their booking fee now and delay drawing down the mortgage for up to six months, therefore customers with existing deals due to end before the end of October this year, have the option to lock in now.
“The beauty of this combined mortgage product is that you have the ability to fix the majority of your borrowing but at the same time can overpay without limitation on the variable rate element of your loan, and this flexibility will certainly appeal to those who receive regular bonus payments or are looking to pay down their mortgage quickly.
“Mortgage lending remains subdued and with the current levels of economic and political uncertainty things are unlikely to pick up markedly in the short term, however this innovative move from HSBC which gives borrowers more choices is a positive step and should be applauded.”
