The Thinking That May Lie Behind the HSBC 1.99% Fixed Mortgage

All signs are currently pointing towards a Scottish housing market that is healthier than ever, with property sales hitting impressive heights and lenders slashing mortgage rates.

Banking giant HSBC caused a media ruckus when it heralded the first ever five year fixed rate mortgage to drop below 2%, a 1.99% rate.

It is widely assumed that this will lead to something of a price war as competitors scramble to match HSBC’s statement of intent with similar eye-catching offers.

So it begs the question: why would HSBC suddenly slash its rates to a level significantly lower than the 2.29% currently offered by its nearest rival?

1.)   Confidence that the economy has, and will continue to, create soaring demand for mortgages and this has to be a key part of the thinking behind the record level rate – more people are buying and selling and more new mortgages are needed to facilitate this.

2.)   The expansion of the internet has helped to raise awareness of great offers out there and all lenders know that the public are far more likely to shop around, with more emphasis on cost savings than was perhaps the case in previous generations.

3.)   It could be a change to generate publicity. Clearly HSBC expect others to follow in response to the market conditions, so by getting in first they get a raft of positive PR to counteract the tax-avoidance scandal that was widely covered earlier this year.

4.)   A belief that the Bank of England will keep interest rates at, or close to, the record low level of 0.5% Put simply if it were to increase its rates significantly, mortgages would not be viable for the lender.

We can guess at HSBC’s intentions, but what we do know is that the financial implications of these lowest ever rates along with the health of today’s property market makes for a great time to be buying or selling.

This year already, our expertise – complimented with the low interest rates and a healthy local market – meant that in the first three months of the year, we successfully have sold more 200 properties. We don’t see this slowing down, so if you are considering selling your home – there really hasn’t been a better time.

Warners, which has held the unofficial title as Edinburgh’s leading property solicitor estate agent for 14 consecutive years since 1999, measured in terms of property sales as recorded by ESPC.