HSBC hikes fixed-rate mortgage cost

HSBC is to hike the cost of its fixed-rate mortgages

HSBC became the latest lender to hike the cost of its fixed-rate mortgages in response to higher funding costs.

The global banking giant is increasing rates on its three-year fixed-rate mortgage for people borrowing up to 75% of their home's value by 0.15%, while the cost of its five-year deal is being hiked by 0.4%.

The group blamed the move on higher funding costs, saying uncertainty over the level of future interest rates had driven up three- and five-year swap rates, upon which fixed-rate mortgages are based.

It is the latest in a line of lenders, including Nationwide, Halifax, Cheltenham & Gloucester, and Barclays' lending arm the Woolwich, to raise the cost of its fixed-rate mortgages in recent weeks.

The average cost of a two-year fixed rate mortgage is now 5.09%, up from 4.67% at the beginning of June, while the average five-year deal is now 6.04%, up from 5.57% a month earlier, with the rate recently breaking through the 6% barrier for the first time since December.

But there is better news for consumers with small deposits or equity stakes, as lenders are gradually increasing the number of products available for people looking to borrow a high proportion of their property's value.

While the number of 100% and 95% loan to value (LTV) mortgages has remained unchanged since the beginning of June at 10 and six respectively, the number of 90% deals has risen from 77 to 98 - a 27% rise.

But on the downside, the number of different products for people with a 15% deposit has fallen slightly to 190 from 195, while there are now 119 different loans for people borrowing 80% of their home's value, down from 127 at the beginning of last month.

The move by HSBC leaves its three-year fixed rate mortgage for people with at least a 25% deposit who do not pay an arrangement fee at 4.74%, while the same loan over five years now costs 5.39%.

The group has also raised the cost of its seven-year fixed rate mortgage, which comes with a £999 application fee, by 0.31% to 5.29%.