Split your mortgage with the worlds local bank

by Mark Johnston

HSBC may well live up to its name as the ‘Worlds Local Bank’ given its international standing. Headquartered in London its one of the largest banks on the planet. HSBC has a network of 8,000 offices in 88 countries but do they deliver on their mortgage proposition?

Whether you’re remortgaging, a first time buyer or a home mover it seems HSBC has it covered and now they’ve entered the market with even more options to give their Customers more choice and flexibility.

Many borrows are confused with which type of mortgage to go for. Some believe that fixing their monthly payments and guaranteeing a set rate makes financial sense and adds a great deal of security. Others believe that they should take advantage of the low interest rates and benefit from being flexible with a variable or tracker mortgage.

HSBC have launched a new product for customers facing this dilemma, do both. The new split loan mortgage offers borrows the best of both worlds by combining the two. The split mortgage allows borrows to proportion their mortgage between a fixed rate and tracker mortgage. Borrows can have 50% of their mortgage rate fixed and 50% of the mortgage at a tracker rate, borrowers even have a choice of the percentage split so 25/75 and 75/25 are also available.

The idea behind this interesting if not potentially confusing product is that borrowers would have two interest rates that apply to a percentage of their total borrowing, confused? Mortgagerate.org.uk are here to help you understand the mortgages that are available for you so we have come up with a few examples to help you along the way.

Borrowers wanting to buy a property worth £200,000 would have to find a deposit of at least £40,000 as the loan to value ratio is 80%. A 50/50 split between a fixed rate and tracker mortgage would work out at 3.39% with the fixed rate proportion (£80,000) reverting to the HSBC variable rate which is currently 3.94% whilst the remaining £80,000 tracks the base rate plus 2.89% for the life of the loan. A non refundable booking fee of £999 applies and an early repayment charge would be applicable to the fixed rate part of the mortgage if repayment was made within the two year period. At current interest rates the mortgage in the example above would cost £792 per month and the overall cost for comparison is 3.8% APR.

Customers do not have to follow a 50/50 split of the mortgage amount between fixed rate and variable. The example above could be split 25% (£40,000) to the fixed rate and 75% (£120,000) to the tracker rate. This would give an overall rate of 2.99% at current rates this would cost £758 per month. HSBC have a clever tool that shows how this split can affect your overall monthly costs which can be found on their website www.hsbc.co.uk.

Although a little confusing this mortgage does benefit borrowers by given them a great deal of flexibility. With such a wide range of mortgages on offer perhaps HSBC may be looking to re-brand themselves as the “Worlds most flexible bank” but we’ll just have to wait and see.

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