Split mortgage offers borrowers some flexibility

WITH experts divided on when and how quickly interest rates may eventually start to rise, HSBC has thrown a new option into the ring for borrowers to consider.

The new two-year split mortgage offers three options in the way you divide up your mortgage borrowing. You can opt for half at tracker rate and half at fixed rate, 75% tracker and 25% fixed or 25% tracker and 75% fixed.

The rates on offer are very competitive, but the higher the fixed portion the higher the overall rate becomes.

This is not surprising because it mirrors current pricing patterns in the mortgage market as a whole.

A 75% fixed/25% tracker deal is priced at 2.99% for a 70% loan to value ratio (LTV) and 3.89% to 80% LTV, with rates as low as 2.49% for the 25% fixed/75% tracker 70% option. All deals come with a £999 booking fee and the split loan mortgage is available to a maximum of £500,000.

This product also gives borrowers the option to pay their booking fee now and delay drawing down the mortgage for up to six months, therefore customers with deals due to end before October 31 this year have the option to lock in now.

The flexibility of this product may also manage to tempt some of those consumers still sitting on the standard variable rate (SVR) fence who have not been sure which way to jump.

The beauty of this combined mortgage product is that you have the ability to fix the bulk of your borrowing but at the same time can overpay without limitation on the variable rate element of your loan, and this flexibility will certainly appeal to those who receive regular bonus payments or are looking to pay down their mortgage quickly.

Mortgage lending remains subdued and with the current levels of economic and political uncertainty things are unlikely to pick up markedly in the short term. However, this innovative move from HSBC which gives borrowers more choices is a positive step and should be applauded.