Yet amid the gloom, there is some positive news. This comes from HSBC, which has thrown a lifeline to some home owners by agreeing to match new customers’ existing rates as long as they are prepared to take out two-year fixed rates and their existing products expire before the end of June.
The HSBC Rate Matcher initiative is an extension of the promotion it has been running for existing customers.
Coming up with this deal is a masterstroke by HSBC both in terms of good PR and also as a way of boosting its share of the mortgage market.
The plan has a few holes but it gives hope to many home owners who might otherwise have been crippled by steeply increasing monthly payments.
And HSBC will have changed the psyche of many savvy consumers. The majority of these visit brokers but this offer means those wishing to remortgage will have to pop into an HSBC branch to enquire about the cost of its mortgages because they are only available direct.
That’s not to say potential borrowers shouldn’t use the services of brokers – far from it. It’s just that brokers now have serious competition from the high street.
But as good as the HSBC offer is, it won’t be right for everyone. Some borrowers won’t even qualify. It’s only available up to 80% LTV to customers with good credit scores and on mortgages up to £250,000.
Downsides also include potential arrangement fees of close to £5,000, although the bank is promising that three-quarters of those applying will pay less than £1,000.
The fee factor may mean borrowers with small mortgages are better off moving to higher rates with no fees. Similarly, borrowers who want a particular feature that HSBC is unable to offer – for example, an offset facility – should look elsewhere.
But this offer shows how deposit-taking lenders have a massive advantage over those that rely on the money markets for funding at the moment.
It also allows HSBC, which is a top 10 but not a top five mortgage lender, to significantly boost its market share. The bank has thrown down the gauntlet to other lenders, doing its bit to help ease the pain of the credit crunch. Let’s hope others follow suit.
HSBC’s initiative also represents an interesting challenge to brokers. To do their best for their clients, they must now factor it in when recommending deals, even if this means they don’t earn proc fees.