HSBC Split Loan Mortgage

HSBC is to launch a Split Loan Mortgage which allows customers to fix a proportion of their mortgage, while the rest of the loan remains variable, tracking the Bank of England base rate for the life of the loan. The loan is designed to appeal to customers facing the dilemma of whether to keep tracking to preserve the flexibility to make overpayments, or benefit from the security of locking into the historically low fixed mortgage rates. HSBC's Split Loan Mortgage lets them have the best of both worlds.

From Monday 26 April, customers will be able to choose to fix 25, 50 or 75 per cent of their loan, with the remaining percentage on a lifetime tracker, at exactly the same rate as the fixed proportion. The actual interest rate will depend on the proportion of the mortgage which is fixed and the LTV of the mortgage. The mortgage deal has only one booking fee of £999 which covers the fixed and tracker loans and is available to customers looking to borrow up to £500,000.

With the current Bank of England base rate at just 0.5 per cent and signs that the economy is improving, the uncertainty of whether to fix or not to fix is mounting.  This uncertainty is not helped by the lack on consensus among economists' predictions, with the differing extremes of the base rate increasing from this month (April 2010), to no increase until mid 2011. 

Martijn van der Heijden, HSBC's Head of Mortgages, said: "It is impossible to predict exactly when interest rates will start to rise and borrowers are facing the potentially costly dilemma of whether they should fix or take advantage of the historically low rates with a variable mortgage. 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."

Adding to the flexibility of the Split Loan Mortgage is the option for borrowers to secure their mortgage over the next few weeks, by paying their booking fee, but not needing to draw-down the funds for up to a further six months. This is an added benefit for borrowers on low SVRs, who are not quite ready to switch, or those not yet at the end of their current mortgage who want to lock into HSBC's deal.

HSBC has devised a special on-line tool to help customers see how their mortgage will work and what their monthly repayment will be.  This gives customers a better understanding of the product and also allows them to tailor a deal that is right for them.

For more information, visit hsbc.co.uk.