HSBC pulls all mortgages for new borrowers
With UK interest rates looking set to rise again later this month, HSBC has withdrawn from the residential and buy to let market temporarily. This follows a flood of new applications from new borrowers eager to lock in rates before they increase again.
What does this mean?
This withdrawal from the market would suggest there is increasing pressure on HSBC to raise their rates. It is very likely that HSBC will return to the market on Monday with higher rates than those that were previously available.
HSBC ordered this removal from the market with a very quick turnaround. Mortgage brokers were only given 4 hours’ notice of the change, with all mortgages pulled within 2 hours.
HSBC has been criticised for this lack of notice, with at least 24 hours being the accepted standard. With rates from other lenders creeping higher over the last few weeks, many new borrowers will have turned to HSBC to try and secure a low interest deal while they can.
Last week, almost 800 mortgages were pulled across the market due to the same uncertainty surrounding mortgage rates. Other lenders who have removed their full fixed rate mortgage ranges include:
- Aldermore (buy to let and residential mortgages)
- Bank of Ireland (buy to let)
- CHL Mortgages (buy to let)
- Fleet Mortgages (buy to let)
- Foundation Home Loans (buy to let and residential mortgages)
- The Mortgage Lender (buy to let)
Currently HSBC is the only lender to completely cease taking applications from new borrowers.
In more news affecting the market, house prices look set to decrease by another 10% over the next 2 years. With mortgages now less affordable and inflation being higher, a drop in housing prices may help correct issues within the market.
Will my existing HSBC mortgage be affected?
Existing HSBC customers don’t need to worry, their mortgages and rates should be unaffected for the time being.
However, it is possible those with variable rate mortgages could see their rates increase following HSBC’s return to the market.
Economic experts have branded HSBC’s actions a ‘dramatic move’ driven by worries about business sustainability.
Why are mortgage rates rising?
Mortgage rates have been increasing due to several factors. The main pressure driving mortgage rates up is the persistently high level of inflation in the UK. While inflation has reduced in the last couple of months (down to 8.7% from 10.1%), it has not fallen as fast as expected.
This makes it likely that the Bank of England will vote to raise interest rates for a 13th consecutive time. UK interest rates currently stand at 4.5%. This is expected to rise to 5% by Summer, peaking at 5.5% by the end of 2023.
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