Cheapest Mortgages

Mortgage rates have been dropping fast, but the news you can now get a two-year fixed-rate mortgage charging just 0.99% interest is still remarkable.

But while the headline rate is stunning – and the deal is open to both people buying a home and those re-mortgaging – it's not without catches.

Details of HSBC's new 2-year fixed-rate mortgage

Maximum loan size of £500, 000, overpayments of 10% of the mortgage balance a year allowed

“While this headline-grabbing mortgage rate will be attractive to many home buyers, only those with a hefty 35% deposit will be able to take advantage of this record low rate - shutting the door on most borrowers, ” said Tashema Jackson, money expert at uSwitch.com .

And on top of the high level of deposit you'll need to take out the mortgage, it also comes with a £1, 499 fee – meaning the fee is actually larger than the annual interest cost for mortgages smaller than £150, 000 - and a maximum loan size of £500, 000.

The small print that costs you

Alamy

“It’s not until you read the small print that you realise there’s also a fee of £1, 499 to pay for this mortgage – on a product that only lasts two years – so in effect that’s an extra £62.46 per month on top of your mortgage payment, ” said Andrew Hagger of Moneycomms.

“Whether this deal is as good as it looks will depend on the size of your mortgage – if you’re borrowing £220, 000 or more then it makes financial sense but for smaller sums there are cheaper alternatives.”

Hagger points out that for a £150, 000 mortgage, you'd pay less overall with Norwich and Peterborough Building Society's 1.49% rate two-year fix than the HSBC 0.99% deal, thanks to its far lower fee of £195.

“It just emphasises the need to take the headline deals with a pinch of salt and to ensure that any comparison is based on the total cost and not the interest rate in isolation, ” he added.