HSBC cuts mortgage rates by up to 0.19 points, sub-5% deals return

HSBC has cut its mortgage rates by up to 0.19 percentage point, taking some deals below the 5 per cent mark. The move comes after several weeks of rate rises from most major lenders. Sub-5 per cent mortgages had almost disappeared over the last month. Only nine were left on the market in early October, according to Moneyfacts.

Those cheaper rates are only available to borrowers with large deposits or equity of 40 per cent or more. Average fixed rate mortgages are hovering just shy of 6 per cent, putting pressure on buyers and homeowners who need to remortgage.

What HSBC is offering

HSBC's cheapest two-year fix is now 4.99 per cent for anyone remortgaging with at least 40 per cent equity. The deal comes with a £999 fee. On a £200,000 mortgage being repaid over 25 years, it would cost £1,168 a month.

For buyers with at least a 20 per cent deposit, HSBC is offering a two-year fix at 5.19 per cent with a £999 fee and £250 cashback. That is one of the best deals on the market.

Why the market is unsettled

At the beginning of the year, most borrowers could get rates below 4 per cent, with two-year fixes going as low as 3.5 per cent. The Bank of England was previously forecast to cut the base rate throughout 2026 because inflation was on a downward path. Lower base rates reduce borrowing costs for lenders and would push mortgage rates down.

That outlook has changed. The escalation of hostilities in the Middle East and resulting rises in energy costs have raised fears that inflation could be stoked again. The Bank of England held the base rate at 3.75 per cent in September, the sixth consecutive hold since December 2025. It is now anticipated that it will raise interest rates. Market coverage has pointed to the Bank of England raising interest rates twice before spring, a major blow for mortgage holders.

It is not entirely clear why HSBC cut its rates today. Mortgage lenders must balance their own borrowing costs and profit margins with the need to offer attractive rates that draw in new customers. Mortgage brokers think the latest cut could encourage competing lenders to follow. In general, mortgage experts think rates will not experience dramatic falls for some time.

Justin Moy, managing director at Chelmsford-based EHF Mortgages, said: 'The market feels like it has plateaued over the last week or so, still around 1 per cent more than we were just a few months ago, but to see HSBC move will encourage other lenders to follow over the coming days.' He added: 'Thankfully there are lots of rates to choose from well below 6 per cent.'

Other deals on the market

For buyers with a 40 per cent deposit, Yorkshire Building Society has a 4.83 per cent two-year fix with £1,495 fees, or a 4.95 per cent five-year fix. Santander has a 4.92 per cent two-year fix and a 4.93 per cent five-year deal, both with £1,499 fees and £250 cashback.

For those remortgaging, Yorkshire Building Society has a 4.96 per cent two-year deal or a 5.05 per cent five-year fix. For tracker deals, Barclays has a 3.99 per cent two-year rate, according to Trinity Financial. Trackers follow the base rate, plus or minus a certain percentage, so they could be risky if the base rate rises. Lloyds Bank and Halifax are offering 4.06 per cent two-year trackers, while Nationwide has a 4.09 per cent deal. If the base rate rises, these deals will increase by the same margin.

Halifax is also offering many of the cheapest deals to higher earners and Lloyds Premier bank account customers, with three-year fixes from 4.87 per cent and five-year fixes from 4.82 per cent.