HSBC has become the latest lender to withdraw interest-only mortgages, following in the footsteps of other high street lenders including Nationwide and Royal Bank of Scotland.
With effect from 25 March the direct-only lender will no longer offer interest-only mortgages to regular borrowers.
But interest-only will still be available to its premier banking customers – those applying for a residential interest-only mortgage with HSBC will need to hold or open an HSBC premier bank account and meet the HSBC premier eligibility criteria.
A spokeswoman for HSBC says: “The changes are being made ahead of the Mortgage Market Review, which is expected to treat interest only mortgages as a niche product offering when it comes into force in April 2014.”
In order to qualify for premier banking, clients need to either have savings or investments of at least £50,000 with HSBC in the UK; or an individual annual income of at least £100,000 with a mortgage, investment, life insurance or protection product with HSBC.
The FSA established as part of the final publication of the Mortgage Market Review that ultimate responsibility for repaying the capital at the end of an interest-only term rested with the borrower, not the lender.
The regulator has promised a thematic review into the interest-only market which will be published later this year.
Coreco director Andrew Montlake says: “I hope that this does not lead to more lenders who have already set a sensible interest only policy reviewing their stance yet again.”
HSBC joins a growing number of lenders to pull out of interest-only, such as Co-operative Group, Coventry Building Society, Newcastle, Royal Bank of Scotland and Nationwide.
And it has become the second lender to pull out of interest-only today after Yorkshire Building Society announced earlier that it was also pulling out.