HSBC has launched a new home loan called the Split Loan Mortgage today, which it hopes will remove the dilemma of deciding between a fixed or tracker rate mortgage.
In answer to the common question of whether to choose a fixed rate mortgage or a tracker mortgage, HSBC explains that its new "innovative" mortgage product allows customers to fix a proportion of the balance of their mortgage, while the rest remains on a variable rate, tracking the base rate for the life of the mortgage.
HSBC says it has been designed to appeal to customers facing this dilemma as the base rate remains at a record low of 0.5 per cent while experts predict a rise by the end of the year is probable, but are divided on when this will happen.
The HSBC Split Loan Mortgage will offer borrowers the "best of both worlds" – the opportunity to benefit from record low interest rates, while also benefitting from the security of a fixed rate.
Available to customers looking to borrow up to £500,000, borrowers can opt to fix 25, 50, or 75 per cent of their mortgage, while the remaining balance will be on a lifetime tracker; the interest rate will depend on the balance between fixed and tracker, but will start from 2.49 per cent, and there is a booking fee of £999.
Martijn van der Heijden, head of HSBC mortgages, said: "Our consumer research shows many households on trackers or standard variable rates feel they should lock in some of the benefit of the low base rate but are not sure how or when. HSBC's new Split Loan Mortgage is an innovative solution for borrowers as they can benefit from a super low rate but also the peace of mind from their fixed portion."
Homeowners who are not quite ready to remortgage yet can secure the HSBC Split Loan Mortgage by paying the booking fee but not drawing down the funds for another six months.
Commenting on the Split Loan Mortgage, Andrew Hagger of online financial information provider Moneynet.co.uk, said that the new mortgage is "a positive step" and that HSBC should be "applauded" for offering borrowers more flexibility.
Mr Hagger predicts that the offer will tempt some homeowners off the fence who have been biding their time while they decide between fixing and tracking.
© Fair Investment Company Ltd
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