HSBC has broken mortgage records by offering UK customers a two-year fixed rate home loan at an interest rate of 0.99 per cent, underlining the difference between the rates Irish homeowners are paying on their mortgages versus their European peers.

Indeed HSBC has launched the product despite a higher base rate in the UK of 0.5 per cent, compared with a rate of 0 per cent in the Euro zone. The move means that a homeowner in the UK servicing a €250,000 mortgage over 30 years will have monthly repayments of just €802.95 thanks to the low mortgage rates. This compares with a repayment of €1,067 a month for an Irish homeowner on the lowest rate available on the Irish market of 3.1 per cent. An Irish property owner on a rate of 4 per cent on the other hand, will have a monthly repayment of €1,193, or almost €400 more a year.

David Hollingworth, director at broker London & Country Mortgages, said HSBC was making a statement by breaking through the 1 per cent barrier. "It's a new low for a fixed rate."

Rate cuts may follow as other lenders look to respond, he said. “It will be interesting to see whether other lenders can manage to match them.” The lender already has another benchmark in the five-year fixed rate mortgage market, which it currently offers at 1.99 per cent.

The deal is available on loans of up to £500,000 and allows annual overpayments of up to 10 per cent a year. However it carries a relatively high fee of £1,499 to arrange.

(Additional reporting The Financial Times 2016)