Cheapest five-year mortgage at 3.95%

HSBC has today launched the cheapest five-year fixed-rate mortgage currently in the market at 3.95 per cent.

The new deal comes with a booking fee of £599 and is available at up to 60 per cent loan-to-value.

The next best-buy five-year fix is from Yorkshire Building Society at 4.19 per cent. It has a £495 fee and is available at a higher loan-to-value of 75 per cent.

The cost of fixed-rates has been reducing since the beginning of the year as swap rates - which indicate expectations of future interest rate rises - have fallen.

But while the cost of fixed-rate mortgages has fallen to the lowest levels seen in recent years, mortgage brokers warn that tracker rate mortgages still offer the best deal.

Last week, the Ernst & Young ITEM Club, an independent economic forecasting group which is sponsored by E&Y, said it believed the Bank of England’s base rate would remain at 0.5 per cent until the end of 2013.

“A base rate of 0.5 per cent will begin to look like the new normal,” said Peter Spencer, chief economic advisor to the ITEM club.

Brokers said trackers continue to offer lower initial payments than a corresponding fixed-rate so those comfortable with the forecasts should secure an attractive tracker margin to capitalise.

HSBC has also launched a best buy variable rate mortgage at 2.19 per cent - bank base rate plus 1.69 per cent - available up to 60 per cent loan-to-value. The deal has a booking fee of only £99 but is only available until 15 August.

“These new mortgage deals offer the best of both worlds, our lowest ever five-year fixed-rate for those customers wanting security, as well as very competitive tracker rates for those preferring flexible payments,” said Martijn van der Heijden, head of mortgages at HSBC.