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HSBC debuts ultra-low rate on home loan

HSBC has waded further into the mortgage market by offering a new deal at 1.99 per cent for borrowers who can stump up a 40 per cent deposit.<br /><br />The rate, the lowest ever for a home purchase or remortgage and a substantial discount on the bank&rsquo;s standard variable rate (SVR) of 3.94 per cent, will last for two years, reverting to SVR after that.<br /><br />Analysts speculated yesterday that HSBC&rsquo;s move could spark a price war among lenders, to the benefit of would-be homebuyers.<br /><br />Andrew Hagger, of Moneynet.co.uk said: &ldquo;It&rsquo;s an aggressive move from HSBC and may shake up what has become a rather stagnant mortgage market &ndash; we&rsquo;ll be watching closely to see how other lenders respond.&rdquo;<br /><br />But he warned that 40 per cent was high for a deposit and pointed out that the booking fee of &pound;1199 on such a short-term deal would add around &pound;50 a month to a homeowner&rsquo;s mortgage bill.<br /><br />Applicants will also need to demonstrate an impeccable credit history to be eligible for the deal, while the rate will track the bank&rsquo;s SVR, meaning that it could rise.<br /><br />The bank&rsquo;s head of mortgages, Martijn van der Heijden, said: &ldquo;Across the market lenders&rsquo; standard variable rates are at an all time low, as a result we are launching our lowest ever mortgage rate &ndash; 1.99 per cent &ndash; to appeal to remortgaging homeowners.&rdquo;<br /><br />The move chimes with HSBC&rsquo;s promise to double its 2007 level of mortgage lending and the bank has already set aside &pound;15bn for home loans.<br /><br />Cheltenham &amp; Gloucester, owned by Lloyds, and the Woolwich, owned by Barclays, both followed HSBC yesterday by announcing plans to cut rates and launch new, cheaper mortgage products.<br /><br />The number of mortgage deals on offer in the UK has reached a yearly high of 1,676.<br /><br />But figures from the financial services comparison website moneyfacts.co.uk show that more than a quarter of new mortgages now require a deposit of 40 per cent, compared to just seven per cent of mortgages last year.