HSBC Restricts Low-Deposit Mortgage Sales

HSBC is now the latest bank to curb its sales of low-deposit 90% mortgages. Many first-time buyers will struggle to find a loan as a result of the move.

The bank hasn’t stopped selling 90% mortgages altogether, but has said that mortgages worth over 85% of the value of a home are now being reserved for customers who are switching interest rates.

The move will allow HSBC to work through its backlog of applications for low-deposit mortgages.

HSBC UK’s head of buying a home, Michelle Andrews, said it was “not a decision we have taken lightly but one we will be reviewing regularly”.

Some customers have been forced to wait up to four weeks to be interviewed by HSBC as it’s 400 mortgage advisers are swamped with applications.

The bank currently operates a short daily window each morning in which brokers can apply for loans. The window sometimes lasts just half an hour before the daily limit is reached.

HSBC accounts for just under 7% of the UK’s mortgage market, and has been reviewing the issue daily in order to find a way to rein-in demand for its low-deposit mortgages.

“The recent significant uptick in applications has meant that we have not been able to consistently meet the high standards we set ourselves, which is not always a positive experience for our customers and can delay and put a property purchase at risk,” said Andrews.

Banks usually raise interest rates or change product criteria when they want to curb demand, such as asking for a higher deposit or implementing more stringent affordability criteria.

Many major lenders have avoided 90%-plus lending since the lockdown due to fears regarding arrears and falling house prices. However, many lenders were caught by surprise by the rise in the market, with banks such as HSBC facing far more applications than it had forecasted.

Head of financial services at Andrews Property Group, Sam Harhat, said: “For 75% loan-to-value mortgages and below, there is a huge amount of lender competition but at higher LTVs finding a lender is like looking for a needle in a haystack.”

Private Finance’s Chris Sykes added: “Given the restrictions at this end of the market, it is no surprise that those lenders still offering higher LTV products are facing overwhelming levels of demand. If buyers require a mortgage at that level and need to move quickly they may struggle at this point in time or may face higher rates.”