HSBC looks to make hay while the rain falls

Worried about your imminent remortgage? Never fear, HSBC plans to ride bravely to the rescue...

Last Updated: 31 Aug 2010

At a time when some of its rivals are disappearing from the mortgage lending market altogether, HSBC has promised to match homeowners’ existing deals for another two years. And with more than one million people due to come off their cheap fixed-rate deals this year, and prices escalating across the board, the bank could see some big business. In other words, it seems to think that the credit crunch can help it clean up in the mortgage market. Every cloud, and all that...

In the last few months, mortgage deals have been getting harder and harder to come by – as well as the withdrawal of Northern Rock (previously one of the market’s biggest lenders), First Direct has also stopped offering new deals (for now), while other lenders have been ramping up their rates due to the spiralling cost of borrowing on the money markets.

So how come HSBC can get away with charging less than everyone else in the market? Primarily because it doesn’t need to go and borrow from other banks; instead it takes the remarkable step of only lending on the basis of its own deposits. Back in the heady days of Northern Rock’s rapid rise, this approach looked amusingly quaint to its rivals; now that the credit markets have frozen up, it looks like the only bank with any sense. ‘We’re in an incredibly strong position whilst others are stepping back,’ HSBC’s Joe Garner told the Telegraph today (no doubt trying not to look too smug).

Of course there will be restrictions, notably that borrowers will need to own at least 20% of the equity in their house – which could be a pretty big ask for those who took advantage of one of the 100% (or even 125%) deals that have been available in recent years. The riskier borrowers are still unlikely to get an offer – HSBC sees an opportunity to ramp up its market share here, but it’s not daft.

But the deal does look like a beacon of hope for those of us who are about to see our deals expire, and have been steeling ourselves for a big increase in rates – could there be at least one lender in town who isn’t going to want the shirt off our backs? The only problem is that the offer will only be available for five weeks, and we can't help wondering why - is it just a sensible precaution by HSBC in case it gets swamped, or is it proof that the bank is largely doing this as a PR stunt and is only willing to commit a certain amount of funds? We certainly needed a bit of good news...

Still, it’s a nice reminder for UK plc that smart business practice can actually pay dividends in difficult economic times – as the fly-by-night merchants fall away, often the best-run businesses can improve their reputation and their market share. So good on HSBC – just make sure you don’t put any of your new customers’ details on a non-encrypted disk and entrust it to a courier, please...

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