The mortgage market has reached a ‘ watershed ’ moment with the launch of the first five-year fixed rate below 2 per cent . The battle between lenders has intensified in recent months , plunging home loan rates to their lowest in history . But the mortgage wars will erupt again next week after HSBC announced a 1.99 per cent interest rate on a five-year fix . Experts said it was the cheapest ever deal of its kind and described the move as ‘ astonishing ’ . New low : The mortgage market has reached a ‘ watershed ’ moment with the launch of the first five-year fixed rate below 2 per cent . The offer from one of the country ’ s biggest mortgage lenders – HSBC is consistently in the top five – launches on Monday and is expected to trigger a flood of rate cuts by other banks and building societies . Fifteen lenders had already cut rates across their ranges in the past week , but more are likely to follow now HSBC has set a new benchmark . Brokers said lenders appeared to be slashing rates ready for the ‘ spring mortgage spree ’ when many families move or remortgage . Mortgage broker Andrew Montlake , of Coreco , said : ‘ The breaking of the 2 per cent barrier for a five-year fix is a watershed moment and one many thought would never be seen in the UK . ‘ Other lenders will now look to compete , but there is only so low they can go before their profit margins start to become too squeezed . ‘ The current crop of low fixed rates could help to spur more borrowers into action as they lock in before these rates disappear. ’ HSBC already had one of the lowest five-year fixes on the market at 2.19 per cent , but decided to under-cut itself to try to steal more customers from its rivals . The only cheaper deal was offered by TSB at 2.09 per cent , but it was available only on loans over £200,000 and for those remortgaging , and carried a fee of £1,995 . With the HSBC rate cut from 2.19 per cent to 1.99 per cent , a homeowner borrowing £200,000 over a 25-year term would save more than £1,100 during the five-year deal . The offer is available only to those with a deposit of at least 40 per cent , with a £1,499 fee . Other than the usual affordability criteria , there are no other restrictions . The battle between lenders has intensified in recent months , plunging home loan rates to their lowest in history . Mortgage broker David Hollingsworth , of London and Country , said : ‘ This is an astonishing low rate for a five-year fixed rate and certainly moves the market on again after a recent lull . They are laying down a marker for other lenders. ’ The mortgage war has erupted six years after the Bank of England slashed its base rate to a historic low of 0.5 per cent to try to boost economic growth during the financial crisis . Recent economic growth had prompted speculation that interest rates could rise this year . But , with the inflation rate at zero , analysts believe the rate is unlikely to rise until the middle of 2016 . This has allowed lenders to offer even cheaper fixed-rate mortgages with more confidence . Charlotte Nelson , at Moneyfacts , said : ‘ This 1.99 per cent deal is the first five-year fixed-rate mortgage to be launched below 2 per cent . ‘ The competition to be the lowest in the mortgage market shows no signs of stopping and is great news for borrowers. ’ The average rate on a five-year fixed rate on offer , across all deposits , is now 3.55 per cent , compared to 4.04 per cent a year ago . Five years ago , the average five-year fixed rate was 5.87 per cent . Increased competition from new banks such as TSB and Virgin has forced major banks and building societies to compete harder , according to experts . They said banks had a ‘ high appetite ’ to lend at the moment as the economy continues to recover , and were desperate to attract custom . But brokers warned that tougher lending criteria meant these cut-price deals were not available to everyone , including older borrowers and the self-employed . Experts warned that borrowers looking for a fixed-rate mortgage deal must consider the whole package rather than the headline interest rate , and factor in any fees , which can add significantly to the overall cost of the loan . Brokers said that the HSBC 1.99 per cent offer was likely to be on the market for at least a week , if not several , depending on the demand .
Battle between lenders has intensified recently , causing rates to plummet . HSBC have now announced 1.99 % interest deal on a five-year fix mortgage . Offer expected to spark flood of rate cuts by banks and building societies . Experts have described cheapest deal ever of its kind as 'astonishing '