HSBC Launches Homeowner Loan Rate Of Less Than 2 Per Cent
HSBC has hit the news this week as the bank has launched a market leading new homeowner loan product with an initial interest rate of just 1.99 per cent, the lowest rate available anywhere on the market, but is it really as good as it first appears to be?
The product is a 2 year discounted loan deal, after which time the rate reverts back to HSBC’s standard variable rate, currently 3.94 per cent. The deal is available up to a maximum loan to value of 60 per cent, which means that borrowers need a substantial deposit and it also has a large arrangement fee of £1,199, to add to the total cost of the loan.
Along with this seemingly cheap loan, HSBC has also launched a new product to a maximum of 75 per cent loan to value on a two year discounted rate of 2.49 per cent, which also carries the same arrangement fee and a three year fixed rate loan at 4.19 per cent, with a £999 initial loan fee and maximum loan to value of 60 per cent.
Whilst, on the face of it, this cheap loan deal seems as though it is too good to be true, many industry experts have warned consumers that this could actually be the case and that borrowers should compare different deals carefully before being tempted by a low headline rate.
Although the initial loan rate is extremely cheap, it is a discounted deal, not a tracker, which means that the bank is able to increase rates at any time, regardless of movements in the base rate (although this is unlikely in the current economic climate).
Also, the initial rate only lasts for two years after which time the monthly cost of the loan will increase to the standard variable rate and the high arrangement fee could possible cancel out any benefits of a low interest rate, depending on the size of the loan. As always, potential borrowers should always consult an independent financial adviser before leaping at what appears to be a cheap loan deal.
