Money Insider: Fee makes HSBC's super-low rate of 0.99 per cent less attractive

Mortgage rates have been tumbling in the past seven days, with the most talked-about being the new discounted mortgage from HSBC at an interest rate of just 0.99 per cent.

There's no question that this is competitive, but the £1,999 product fee is a major part of the deal that seems to have been conveniently overlooked by some pundits and journalists.

When you weigh up the total cost of rate and fee, it's not the cheapest mortgage on the market for consumers looking to borrow less than £300,000.

There has been too much emphasis on the headline-grabbing rate and not enough on the sizeable fee – which over the two-year term adds the equivalent of £83.29 per month to your repayments.

Unfortunately some customers will be drawn in by the clever marketing without realising there's a £2k sting in the tail.

For people looking for a variable-rate mortgage, there is a two-year tracker deal currently available from Norwich & Peterborough Building Society priced at 1.44 per cent but with a much lower £345 fee.

This mortgage not only offers a more generous loan-to-value of 65 per cent compared with HSBC's 60 per cent, it also works out cheaper until you reach a tipping point of £300k at which point HSBC finally becomes better value.

It's also worth noting that the maximum mortgage permitted under the HSBC offer is £500,000.

Putting the possible cost savings into perspective, someone taking out a £150,000 home loan (25 years) with Norwich and Peterborough would save £910 over the two-year term. Similarly a £250,000 mortgage will work out £406 cheaper.

Banks and building societies continue to develop products with profit margins based on a wide range of rate and fee combinations, and while it may work for them, for potential customers it can be a big headache.

Selecting the most appropriate mortgage product certainly isn't a two-minute job. The best deal will also depend on your own personal circumstances including the length of the term and the amount you're looking to borrow.

When you consider that your mortgage is likely to be the biggest financial transaction you'll undertake in your lifetime, it makes sense to seek advice from an independent mortgage broker to ensure you don't make what could be an expensive mistake.

Sainsbury's lifts maximum unsecured loan to £35,000

Until last week the maximum you could borrow on an unsecured personal loan was £25,000. But Sainsbury's Bank has just announced that it's now offering loans up to £35,000 without customers having to put up their property as security.

At a rate of 6.9 per cent APR it works out more expensive than increasing your mortgage, but it will appeal to those who can afford the monthly repayments but don't have the equity in their property to enable them to borrow an extra £35k from their mortgage provider.

Funding an extension or major home improvements using this unsecured loan finance will allow people with little or no equity to improve rather than have to move house. This is likely to prove a more cost-effective option for many, once legal and moving costs of buying another property are factored in.

The application and approval process will be quicker and less arduous than extending your mortgage, but at a price.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk