High Street Mortgage Rates Hit New Sub-1% Low as Competition Heats Up

The mortgage battle being fought by the UK’s biggest lenders is heating up, with advertised rates having dipped as low as 0.83% with some banks. There are now numerous deals being advertised with introductory rates of less than 0.9%, with HSBC having broken its own long-standing records with a product up for grabs at just 0.89%.

Elsewhere, Halifax has a market-leading two-year introductory deal available at 0.83%, coupled with a standard £999 arrangement fee.

All the ultra-affordable products available at these kinds of lows are open only to those able to offer a deposit of 40%. Decent offers are available for mortgages with lower down payment requirements, but they do not come close to rivalling these all-time High Street lows.

How low will mortgage rates fall?

Analysts have been debating for some time exactly how low mortgage rates could fall before the beginning of an inevitable return to norms. Experts are split evenly down the middle, with half suggesting they could easily go lower than 0.5% and the other half saying the deals available right now are as good as they are going to get.

Brokers are urging those who are fast approaching the end of their introductory rate mortgage deal to consider switching now before being automatically transitioned to a standard variable rate product. There is a chance for a vast audience of mortgage payers to save many thousands of pounds by taking advantage of the opportunity while it is available.

One of the reasons for these record-low mortgage rates is the fact that the Bank of England base rate is still sitting at 0.1%, where it is likely to remain for some time. The housing market in general has seen record activity over the past few months, with demand having consistently outstripped supply in all regions of the country.

This has prompted lenders to introduce increasingly generous incentives to potential applicants in order to give them a competitive edge over rival lenders.

Competitive deals with lower down payments

For applicants able to pull together a deposit of 25% to 30%, there are deals available that are edging close to the 1% mark. HSBC has a 75% LTV mortgage available with a 1.19% introductory interest rate and an arrangement fee of £999.

Mortgages with a deposit requirement of 15% are still competitive, typically hovering around the 1.8% mark with similar arrangement fees. For buyers looking to take out a 90% LTV loan, there is a significant shift in average rates from around 2.2% to 2.5% or more. Some deals for 10% mortgages are hovering around the 2.9% mark, though with additional incentives such as low arrangement fees and up to £500 cashback with some lenders.

Applicants are therefore advised to consider the total costs associated with taking out a mortgage rather than focusing exclusively on the initial low APR.