In a bid to gain an even larger share of the mortgage market, HSBC this morning announced the launch of its cheapest ever home loan - a two-year discount deal with a starting rate of 1.99%.

The Woolwich and Cheltenham & Gloucester have also announced cuts to their fixed-rate mortgages.

HSBC’s discount rate applies to borrowers with a 40% deposit, and is set at a 1.95% discount to the bank’s standard variable rate of 3.94%.The bank was the UK’s largest lender during the first half of the year.

The deposit needed to secure a mortgage has increased sharply over the past year as lenders restrict credit to borrowers. Currently 27% of new mortgage deals require a deposit of 40%, compared with just 7% of deals a year ago. There’s some good news for first time buyers, however, with a slight increase in the 10% deposit tier this year.

Both property prices and sales have picked up this year after an unprecedented slump due to the credit crunch and recession. The number of mortgage deals available on the market has also increased to 1,676, the highest figure this year.

Aaron Strutt of Mortgage Brokers Trinity Financial Group said that the new HSBC deal offered incredible value compared with other mortgages on the market.

“This is a remarkably low rate of interest if you have a 40% deposit,” he said.

“It will be interesting to see if this prompts other lenders into launching their own discounted variable rates.”

HSBC’s deal comes with an arrangement fee of £1,199.

The bank’s interest rate is higher at 2.49% for those with a 25% deposit, and is 3.89% for those who have only a 10% deposit.

This entry was posted on Thursday, September 3rd, 2009 at 8:20 am and is filed under Housing Market, Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.