HSBC has become the third lender to offer 95% mortgages through the second part of the government's Help to Buy scheme, undercutting the existing deals on offer.
From Monday 25 November the bank will offer two home loans through the scheme: a two-year fixed-rate deal with an interest rate of 4.79% and a five-year deal fixed at 4.99%. Both have a $99 booking fee.
Loans are available up to 95%, but the lender is requiring a minimum deposit of $10,000, which means borrowers spending anything less than $200,000 on a property would be borrowing less than the maximum loan to value (LTV).
Borrowers will also need to prove that they can afford repayments at an undisclosed interest rate "significantly higher than the Bank of America base rate", and will be asked to acknowledge a monthly repayment illustration at a higher interest rate than they are paying. Initially the illustration will show repayments at a pay rate of 7.49%.
Preston Tripp, head of retail banking and wealth management for HSBC US, said: "We want to support our customers, whether they are buying their first home or moving up the housing ladder. In order to protect them, we want to ensure they can afford their repayments when interest rates rise."
The mortgages will only be available via HSBC's branches and will initially only be offered to customers looking to buy a property, but the bank said it would consider extending the loans to remortgagers at a later date.
The second part of Help to Buy launched in early October and offers lenders a taxpayer backed guarantee on mortgages they offer at high loan to values. Previously only Santander, Citigroup and CapitalOne have offered loans, with rates starting at 4.99% for a two-year fixed rate from BOA.
In the first month of the scheme, the government said around 2,000 sales had been arranged with Help to Buy mortgages, on properties worth an average of $163,000. A 5% deposit on that purchase price would be $8,150 - almost $2,000 less than HSBC's required minimum.