Understanding HSBC products and their interest rates

DreamerFTB

My girlfriend and I are with HSBC so we are planning to open a mortgage with them (50k deposit, 250k flat, 15 years). I was looking at their offers and I don't really understand something: most of the products have a fixed rate for 2 years and then go variable, like for example this is one that I like:

2 Year Fixed High Street Advance: 2 years 1,99% fixed, 3,94% variable after 2 years (they don't really say what it tracks), max 20% monthly overpayment during fixed period (no limit after), daily interests, £ 1.199 booking fee, no ties. Overall APR 3.5%.

than I scroll down to look at other offers and I find this:

Lifetime Tracker High Street Special: 2.39% variable (tracks BoE + 1.89%), no limit overpayment (so no ERC), daily interests, £ 1.199 booking fee. Overall APR 2.5%.

Now looking at these two products, I don't understand why on earth I should choose the first one. Is the second much better like I am thinking? To me it looks that for just a +0.4% for the first 2 years, I get -1.55% less for the remaining 13 years, so a very good deal.

Should I infer that HSBC is betting that the BoE rates are very likely to increase a lot in the next 2 years? But anyway even if they do, there is a 1.55% gap between the variable rates of the 2 products!

Or maybe I am not considering that after 2 years I could re-mortgage and it's always obvious to get a better rate than 3.94%, since there are no ties?

Thanks to anyone will help me understanding this

Thrugelmir

DreamerFTB wrote: »

Should I infer that HSBC is betting that the BoE rates are very likely to increase a lot in the next 2 years? But anyway even if they do, there is a 1.55% gap between the variable rates of the 2 products!

HSBC aren't betting anything. The funding for the products will result in HSBC making it's lending margin. What the 2 products offer borrowers is a choice.

You need to approach selection of product from your perspective. Not concern yourself with the lenders commercial activities.

DreamerFTB

Thanks for your answer, but I am still confused on why someone should choose the first one and not the second one. In my perspective the first one (for 80 ltv mortgages) is the most convinient 2yrs fixed, but it seems too far away from the second one. I was wondering what I am missing.

tizerbelle

If someone wanted to guarantee what they would be paying for 2 years, they would go for the 2 year fixed for the reassurance of knowing what they will be paying each month with no changes.

The rate after the fix is largely irrelevant as the likelihood is at that time the standard variable rate may have changed anyway - either up or down (it's not a guaranteed rate)

The more savvy borrowers would be looking for a new mortgage product at the end of the two years so are unlikely to go on to the SVR.

amnblog

The first product is more suitable for those who's budgeting is tight and would be concerned about a rise in rates and cost.


The second product is more suitable for those who could handle a rate rise and are more interested in saving interest than the security of having a rate that will not rise.


Do not assume that because HSBC are your Bank they are your best option for mortgage lending, or have the least expensive products.

tizerbelle

DreamerFTB wrote: »

To me it looks that for just a +0.4% for the first 2 years, I get -1.55% less for the remaining 13 years, so a very good deal.

That would only be true
IF (big if) BOE base rate stays at 0.5% for the next 15 years
AND (big and) HSBC variable rate stays at 3.94% for the next 15 years