HSBC increases mortgage lending by 3%

HSBC has doubled its profits and reported pre-tax profits of $11.1bn (£7bn) for the first six months of 2010, but its total mortgage lending in the UK has only risen by 3% from December 31 2009 to $96bn (£60bn).

In its financial results its says growth was constrained by a reduction in remortgage activity as many homeowners with low standard variable rate mortgages have strong incentives to remain with their existing mortgage providers.

The UK mortgage portfolio primarily consists of lending to owner-occupiers.

Almost all new business was to customers holding current or savings accounts with HSBC, which HSBC says facilitates and strengthens the underwriting process.

Loan impairment charges and delinquencies in the UK mortgage book declined in the first half of 2010.

In the HSBC Bank mortgage portfolio, excluding First Direct, two months or more delinquency rates fell from 1.4% at 31 December 2009 to 1.3% at 30 June 2010.

In the first half of 2010, the average loan to value ratio for new business in the UK was 53%, a decrease of 5 percentage points from the end of 2009.

Interest-only mortgage balances increased by 2% to $43bn at 30 June 2010, driven by growth in First Direct. The majority of these mortgages are offset mortgages linked to a current account for which delinquency rates remained at low levels.

Second loan mortgage balances declined by 9% at 30 June 2010.

All second loan balances in the UK were held by HFC Bank Limited and were placed in run-off in 2009.

Within this portfolio, two months or more delinquency rates declined from 6.6% at December 31 2009 to 5.7% at 30 June 2010 driven by improvements in the UK economy which helped customers to stay current with their repayments.