It seems that most mortgage lenders are trying something to boost confidence in the mortgage market. 

Now, HSBC is once again promising to match or beat your current mortgage rate.

But there is a catch – you will face fees of up to £4,700!

The Rate Matcher mortgage is available to those of you on rates as low as 2.49% and is targeted at those of you stuck on your mortgage lender’s standard variable rate (SVR), which are generally cheaper than many fixed-rate or tracker mortgage deals.

Britain's biggest bank will promise to match or beat your current mortgage rate and fix the rate for a minimum of 2 years. It is only for those of you borrowing less than £250,000, with a maximum Loan to Value (LTV) ratio of 75%.

But many of you looking to remortgage will pay rates almost twice as high if you opt to fix for 3 or 5 years.  Not surprisingly, remortgage activity has slowed considerably, with less than half the number of you remortgaging in the first three months of this year compared to the same period in 2008.

Martijn van der Heijden, HSBC's head of mortgages, said:

"One of the reasons floating mortgage rate holders have put off fixing their mortgage is that rates on offer are often 2%-4% higher than what they are currently paying. Our Rate Matcher mortgage gives these borrowers another option and enables them to fix at, or close to, the rate they are paying."

“With the base rate at its historic low, it’s definitely a case of ‘when’ not ‘if’ mortgage rates will rise.

"It’s in the interest of the millions of homeowners enjoying exceptionally low mortgage payments to think ahead now and ask themselves by how much would rates need to rise, to seriously impact their lifestyle. Anyone who would struggle to get by on an interest rate of just four or five per cent should really act now”.

Is the Rate matcher mortgage any good?

You should take note that the complex fee structure will mean that this is not a viable option for some of you.

The lowest rate of 2.49% is only available as a 2 year fix, while the lowest rate for anyone wanting to fix for 5 years will be 4.24%.

The exact fee paid will depend on three factors: the size of your mortgage, the loan to value (LTV) and rate you are “matching”. The lower the rate, the longer the deal – and the larger the LTV, the bigger the fee will be.

So, if you have a £250,000 mortgage and equity of 25% and want to fix at 2.49% for two years, you face a fee of £4,699. The fee is not much lower if you have a 40% deposit; it drops to just £4,099.

The charge drops to £799 if you have a 75% LTV, £100,000 mortgage fixed for 3 years at 3.89%; a more typical scenario according to a HSBC spokesman who said:

 "The fee is there to subsidise the rate, we are not making any bones about that. We are trying to show that you can have a rate the same or close to your lender's SVR, but people need to work out whether that is worth if for them or not."

How does Rate Matcher compare?

Currently rival lenders Lloyds TSB, C&G and Nationwide have the lowest SVRs on the market at 2.5%, while Halifax, the biggest mortgage lender, has an SVR of 3.5 %.

NatWest and RBS charge you 4%, whereas the average SVR is 4.61% according to Moneyfacts.co.uk, the financial website.

HSBC first offered its Rate Matcher mortgage this time last year when interest rates looked set to rise and many of you were worried about experiencing a payment shock when you came to the end of a short-term fixed mortgage or discount mortgage.

Only recently, HSBC committed to lending £1 billion to those needing to borrow up to 90% LTV.

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This time round a similar rate, but with a lower fee, is available from the Market Harborough building society at 2.89% with a £1,594 fee up to 75% LTV. In addition, 5 year fixed rates start at 4.64% up to 65% LTV with a £999 fee from the Chelsea Building Society.

Reaction to HSBC's Rate Matcher remortgage

Louise Cumming, a mortgage expert at Moneysupermarket.com said:

“Undoubtedly for certain borrowers there will be some killer deals available on this Rate Matcher scheme. But this is a complex concept in a market this is already quite difficult. Borrowers must assess the implication of the fee being charges, rather than concentrate solely on undercutting their current lender’s mortgage rate.”

“For some borrowers this deal will represent a significantly lower rate than the SVR their current lender is offering. However, the maximum loan-to-value ratio of 75 per cent severely limits the deal’s audience and for those with the equity, a hefty up front fee is likely to prove quite a deterrent.

“Another potential issue to note is that this is a fairly complicated product and one which borrowers might need expert advice to fully understand. However the traditional sources of such advice, the intermediary market, do not have access to this deal, as HSBC’s mortgage products are only available directly from the lender.”

Melanie Bien of mortgage brokers Savills described the deal as a "popular marketing tool" for HSBC and warned those of you wanting to fix for 2 years to be prepared for what could be a steep hike in mortgage payments once your deal ends.

"We expect rates to stay low for the rest of this year before rising quickly next year," she added.

More HSBC incentives

In addition to the Rate Matcher mortgage, HSBC is also launching a new 7 year fixed-rate mortgage for those of you with a 25% deposit, with a fixed rate of 4.98%.

It also comes with a £999 fee and the maximum loan size is £500,000.

What do you make of HSBC’s Rate Matcher mortgage?

A good option, or a bit of a rip-off with the fees?

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