The bank’s launch of the lowest ever five year fixed-rate mortgage at 2.99% on Friday was met by excitement and a veritable frenzy of delight on Twitter from the intermediary industry.
Advisers won’t directly profit from the direct-only deal as we know, as HSBC only offers loans direct but the lending move could be the gear shift this idling market needs. Pushed out ahead of the buying season, the 2.99% for a five year term and 3.99% for seven, the rates will tempt many borrowers, particularly those with bigger loans.
HSBC has already grown its mortgage business from 3% market share in 2007 to closer to 12% today. The bank made no secret of its ambitions when it promised in January to lend £15bn of mortgages with £3bn set aside for first-time buyers. Today, it has announced a further £2bn, pushing projected lending up to £17bn this year
No other substantial lenders are setting concrete lending targets, which not only reassures the market, but shows strategic energy in a lending market in reverse gear this year.
No moves are ever above criticism and one jester suggested the lender’s processing times could magic the five-year fix into a three-year product. Other media critics suggest borrowers could lose the hefty £1495 booking fee if the purchase falls through.
But could these moves become the starter gun for an all-out, humdinger of a mortgage rate war? Perhaps unsurprisingly, other than Lloyds, which said its rates are constantly “under review” none of the other top five UK lenders would be drawn.
But with further detail out on Friday on the £80bn of government funding for lenders, lenders may have been given the tools to review lending strategies.
Simply put, the scheme offers cut-price funding to those who lend more and charges those restricting lending more, offering a competitive advantage to lend more for the first time.
Chancellor George Osborne said: “[This] announcement aims to make mortgages and loans cheaper and more easily available, providing welcome support to businesses that want to expand and families aspiring to own their own home.”
Commentators seem less sure, stopping short of saying this will boost mortgage business and by how much. However, by incentivising lending and financially penalising those lending less, we finally have affirmative action from the government.
The UK could be gearing up again on the product front, says Brian Murphy, head of lending at Mortgage Advice Bureau.
“One of the things we pay attention to is the number of mortgage deals in the market. After peaking in Autumn last year, product launches have been on a slow slide until the rot stopped in May,” he said, with a small rise in June and July.
“The Bank of England scheme could herald a reversal of fortune,” he said.
The world has changed and several of the biggest lenders are wrestling with a raft of larger problems than the hunt for market share. However, the government scheme, still being digested, is an interesting proposition for any lenders keen to compete.
