text: 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.
target: 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'