HSBC has become the latest bank to restrict sales of its 90% low deposit mortgages, which will leave many first-time buyers looking for a loan.
While HSBC stopped before withdrawing 90% of mortgages, it said it was “temporarily reserving” mortgages worth more than 85% of a home’s value for customers changing. interest rate. It is intended to help the lender deal with a backlog of low deposit mortgage applications.
Michelle Andrews, home buying manager at HSBC UK, said it was “not a decision that we have taken lightly but that we will review regularly”.
The bank’s 400 mortgage advisors are currently inundated with inquiries from buyers, with clients forced to wait up to three to four weeks to be interviewed by HSBC. Meanwhile, the bank only opened a daily half-hour window in the morning for brokers to apply for loans before the daily cash allowance ran out.
HSBC – which accounts for around 6.8% of the UK mortgage market – was examining the issue daily as it tried to find a responsible way to curb strong demand for its low deposit mortgages.
“The recent significant increase in the number of applications has meant that we have not been able to consistently meet the high standards we have set for ourselves, which is not always a positive experience for our clients and can delay and delay. jeopardizing the purchase of a property, ”said Andrews.
Typically, banks wishing to reduce demand raise interest rates or change product criteria, such as requiring a higher deposit or tightening accessibility constraints.
Since the foreclosure, other major mortgage lenders have avoided loans by more than 90%, fearing falling house prices and arrears. However, the surprise market surge surprised lenders, with HSBC facing far more applicants than expected from first-time buyers.
The introduction of HSBC’s restrictions – which were first reported by The Guardian – will leave many first-time buyers with only Nationwide as an option. But Nationwide has strict criteria for its 90% loan, which will leave many potential buyers unable to find a loan. There was a silver lining for first-time buyers, with Virgin Money slacking off into the low deposit market – but only if customers agree to a fixed period of at least seven years.
“We cannot carry the market on our own, the operational pressure on us is enormous,” an HSBC senior banker told The Guardian. However, the banker insisted that the mortgage market remains strong, with arrears and defaults still low.
Sam Harhat, Head of Financial Services at Andrews Goods Group said, “For mortgages at 75% and below there is huge competition among lenders, but at higher LTVs finding a lender is like looking for a needle in a haystack.”
Chris Sykes of Private Finance Brokers added, “Given the restrictions at this end of the market, it’s no surprise that lenders still offering higher LTV products face overwhelming levels of demand. If buyers need a mortgage loan at this level and need to act quickly, they may struggle at this point or face higher rates. ”