HSBC's 'Rate Matcher' mortgage fights back against payment shock...but not for much longer.
Is the special fixed rate on your mortgage about to disappear? Are you fretting about how you'll cope with higher repayments if you can't switch to a new low rate? Does the threat of a more costly standard variable rate mortgage leave you in a cold sweat?
Before you fly into a blind panic, HSBC may have the answer.
Back in April, HSBC came up with what could be the perfect antidote to payment shock: The Rate Matcher mortgage. My Foolish friend, Cliff D'Arcy, explained this deal in HSBC Rides To Homeowers' Rescue!
In a nutshell, HSBC's solution is to match the rate on your existing fixed rate mortgage for the next two years. This could protect you from a potentially more expensive mortgage -- or what's known as payment shock -- once your current fixed rate deal has come to an end.
This sounds like a really attractive offer, especially since the average cost of a two-year fixed rate mortgage has stepped up dramatically from 5.42 per cent to 6.71 per cent over the last eighteen months, according to research data analyst, Defaqto.
HSBC said the Rate Matcher mortgage had been so popular with re-mortgagers that it extended the original offer period by another six weeks. But extra time is nearly up. If you want to take advantage of the deal, get your skates on because it's only available until 29 June.
But look before you leap because a deal this good comes with a few catches:
Firstly, to qualify for Rate Matcher, you'll need to have a deposit or equity stake in your home of at least 20%, and your current fixed rate deal must end before 31 August. If you're already an HSBC fixed-rate mortgage borrower, you'll only need 10% equity.
Sadly, this means Rate Matcher could be beyond the reach of many borrowers with little equity, as HSBC cherry-picks lower-risk customers.
Secondly, your fixed rate will only be matched down to 4.79%, even if your current deal offers a lower rate.
Thirdly, you'll need to stump up for an arrangement fee. The amount you'll have to pay depends on the size of the mortgage loan you need and your current interest rate. The examples below will give you a rough idea of how that works:
Rate Matcher Fees
Loan amount | £95,000 | Loan Amount | £145,000 |
|---|---|---|---|
Fixed rate | 4.94% | Fixed rate | 5.24% |
Fixed period | 2 years | Fixed period | 2 years |
Fee | £999 | Fee | £599 |
HSBC reckons two-thirds of borrowers are likely to pay arrangement fees of £999 or less. That said, in certain scenarios the fee could run to thousands, since the maximum that could be charged is a staggering £9,999. Obviously, this could be a huge deterrent.
So when you're mulling over any new mortgage -- not just Rate Matcher -- make sure you take the total cost of the deal into consideration. A great rate can easily be wiped out by an extortionate upfront fee. Read How I Picked My Mortgage to help you calculate whether the mortgage you've been offered really does measure up.
And, if you're thinking Rate Matcher could be the answer to all your problems, make a point of finding out if there are any penalties before you leave your existing lender. Even if your current fixed rate deal is almost over, some lenders will make you pay an early repayment charge (ERC) which extends beyond the introductory period. Plus you could be hit with extra mortgage exit fees. By checking out the costs first, you'll avoid a nasty sting in the tail.
That said if the penalties aren't too steep and you're keen to keep hold of your current rate, Rate Matcher could be right up your street. But it's a good idea to speak to a whole of market mortgage broker to see if there's any other mortgage deal out there that could do even better.
And finally here's a quick recap:
- Rate Matcher is available to both new and existing HSBC mortgage borrowers.
- HSBC will rate-match your existing fixed-rate deal, down to rates as low as 4.79%.
- Fixed-rate deals will last for two years. Existing HSBC customers can choose to fix the rate over two, three or five years.
- You'll have to pay an arrangement fee which varies depending on how much you borrow and your current interest rate.
- You'll need a deposit or equity stake of at least 20% in your home, or 10% if you're an existing HSBC fixed-rate borrower.
- Rate-matching is only available on loans up to £250,000, or £500,000 for existing HSBC customers.
- You can only apply if your existing fixed rate deal ends before 31 August.
- Be quick. The deal is only available until 29 June.
Try The Motley Fool Mortgage Service to help you compare deals.
More: Beware Of Sneaky Mortgage Fees | How To Guarantee A Great Remortgage