HSBC makes a comeback in the mortgage broker market with adjusted rates

In a surprising turn of events, HSBC has reentered the mortgage broker market after a temporary withdrawal. The bank has introduced revised rates for its remortgage products, signalling a shift in its strategy. Jo Thornhill reports on the bank's renewed offerings and the factors that led to its recent retreat.

Among the new deals presented by HSBC, one particularly catches the eye: a two-year fixed rate for remortgage at 4.99 per cent (60% LTV) and a five-year fix (60% LTV) at 4.64 per cent. These rates come with a £999 fee. Interestingly, just last week, these same deals were priced at 4.84 per cent and 4.34 per cent respectively, clearly indicating a change in the bank's approach.

The temporary withdrawal of HSBC's products for new customers available through brokers occurred last Thursday. The sudden decision stemmed from a spike in swap rates, which are the interest rates at which banks lend to each other. These swap rates play a crucial role in determining the pricing of fixed-rate mortgage deals offered by lenders.

Moreover, HSBC, the sixth-largest lender by market share according to UK Finance, has also increased the cost of fixed-rate deals for buyers. The rates have gone up by up to 0.25 percentage points. For instance, HSBC's two-year fixed rate for home purchases (85% LTV) has risen to 5.19 per cent (£999 fee) from 4.94 per cent just last week.

An HSBC spokesperson addressed the changes, stating that the cost of funds had been increasing, and like other banks, HSBC needed to reflect this in their rates. This move by HSBC coincides with Santander's announcement that it will be pulling all mortgage products for new business through intermediaries. The bank plans to return to the market on Wednesday (14 June), and industry experts predict that the deals will be repriced higher.

As the mortgage market witnesses these shifts, the Centre for Economics and Business Research has released data that estimates borrowers will face an additional £9 billion in mortgage payments in 2023 and 2024 due to increased interest rates. This revelation raises concerns among homeowners, as they grapple with the implications of rising costs.

Nick Mendes, the technical mortgage manager at broker John Charcol, sheds light on the current scenario. He explains that with lenders across the market adjusting their pricing, being the cheapest option puts a lender at a disadvantage. The influx of customers can overwhelm the lender and negatively impact service levels. Mendes anticipates that more lenders will make short-term adjustments to their pricing, making it a challenging time for homeowners seeking new deals.

Notably, NatWest has also decided to increase mortgage rates for both new and existing customers, as well as buy-to-let borrowers and shared equity mortgages. The new rates will take effect tomorrow (13 June). The two and five-year fixed rate deals for residential new purchases, including first-time buyer deals and remortgage, will rise by 0.2 percentage points. Meanwhile, existing customers opting for product transfer deals will face an increase of up to 0.35 percentage points. Buy-to-let remortgage fixed rates will rise by up to 1.24 percentage points.

Clydesdale Bank is also following suit by increasing rates for existing customers (product transfer deals) by up to 0.3 percentage points from 8 p.m. today (12 June). Tomorrow (13 June), the lender plans to reintroduce its fixed-rate mortgage range for new customers. It is expected that the rates for new business will increase by a similar margin to those for existing customers, as the deals were withdrawn at the end of last week.

HSBC's withdrawal from the mortgage market marks the first instance since the challenging mini-budget issued in September under the government led by Liz Truss. As one of the key players accounting for nearly a quarter of the home loans market, HSBC's decision carries substantial weight and reverberates throughout the industry.

The recent surge in mortgage rates can be attributed to disappointing inflation data, which revealed a slower-than-expected decrease in inflationary pressures. In response to this economic backdrop, speculations have emerged that the Bank of England might raise interest rates beyond previous forecasts, potentially reaching up to 5.5 per cent, compared to the current rate of 4.5 per cent set last month.

In line with the changing landscape, Nationwide, the largest building society in Britain, has announced its decision to increase fixed mortgage rates for new borrowers starting from Friday. This strategic move aims to ensure the long-term sustainability of their mortgage offerings, highlighting the need for adaptability in these uncertain times.

While HSBC's decision to withdraw new mortgage deals has faced criticism from industry brokers, who argue for more substantial notice periods, the situation underscores the challenges and uncertainties encountered by the mortgage market. Katy Eatenton, a representative from Lifetime Wealth, expressed frustration over difficulties in accessing HSBC's website, which hindered brokers from submitting new applications throughout the afternoon on Thursday.

The mortgage market finds itself navigating through turbulent times, as pointed out by Riz Malik, founder and director at R3 Mortgages in Southend-on-Sea. The delicate balance between meeting surging demand, accommodating potential rate increases and ensuring sustainable lending practices poses a significant challenge for financial institutions operating in this ever-evolving landscape.