Battle of the Banks – Mortgage Price War

by Mark Johnston

UK Banking giants HSBC and Barclays are going head to head to take the lions share of the UK mortgage market. Both banks weathered the financial crisis well unlike many of their rivals which has given them a good footing and the resources to take on more mortgage customers.

Barclays cut their rates on its Woolwich branded tracker mortgage earlier this month to attract more customers but HSBC hit back by keeping its table beating 1.99% discount product up for sale past its deadline for applications.

There seems to be no stopping either of the banking giants and they seem to have the wiling and resources to deliver competitive products which is driving down prices in the market.

Barclays has just cut its mortgage rate on its tracker mortgage by 0.45% which has brought it down to 2.79% for a 70 percent loan to value mortgage. The home loan has a £999 fee and is 2.29% above the current 0.5% base rate.

The head of mortgages at Barclays Woolwich arm, Andy Gray said: “We’re seeing more interest in tracker mortgages, probably related to the combination of rock-bottom, stable base rates and an increasingly competitive market. These new mortgages have the potential to appeal to significant numbers of customers.”

At the same time they are also launching a fee free version of their tracker mortgage which will be priced at 2.69% above base rate, making it 2.69%.

HSBC has responded to Barclays new products launches and amended rates by reviewing their own. Their lifetime tracker mortgage is currently 2.74% for borrowers with a 40% deposit as the loan to value is 60% and a £999 fee. If the deposit is a little too much they also have a 75% loan to value version that is priced slightly more at 2.95% with a £699 fee.

They have also extended their 1.99% discount mortgage in order to compete with Barclays although it does require a large deposit of 40% and a hefty fee of £1199.

Figutres on a recent report has suggested that HSBC has agreed around 2,500 discount tracker mortgages based on Halifax’s average house price of £163,500.

HSBC’s head of mortgages, Martijn van der Heijden said: “Our range of mortgages have topped the best buy tables for most of the year. We made a commitment to stay open for business and extending the 1.99 per cent mortgage is part of that.”

The competition is still strong as Barclays launched a product in direct competition with HSBC’s discounted mortgage of 1.99%. The new Barclays home loan is priced 1.98% undercutting HSBC by 1%. Other than that the mortgages are pretty much the same, loan to value is 60%, the same as HSBC.

The big news is HSBC’s new first time buyer product which has a loan to value of 90% and a low fee of £99 for a two year fixed rate mortgage of 4.99%. All eyes are on Barclay’s to now to see if they can produce a mortgage that will put as smile back on first time buyers faces.

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