HSBC Withdraws Mortgage Deals for New Borrowers in UK

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In another indicator of the UK lending market’s turmoil, HSBC has temporarily removed mortgage deals for new consumers.

The indicator shows that lenders are under pressure to raise mortgage rates.

The bank announced on Thursday that it would discontinue all “new business” residential and buy-to-let schemes, with deals resuming on Monday.

Nationwide said it needed to raise fixed rates to guarantee they remained “sustainable.”

Mortgage rates have risen since recent statistics revealed that inflation was not falling as swiftly as projected.

There have been speculations that the Bank of England will hike interest rates from their current 4.5% to as high as 5.5%.

It has prompted many lenders to raise mortgage rates and also to remove deals.

HSBC said on Thursday that it was withdrawing new deals “to ensure that we can stay within our operational capacity and meet our customer service commitments”.

It makes it likely that HSBC will raise rates on Monday.

Brokers expressed surprise at the speed of the withdrawal, which came initially with about four hours’ notice, only for them to be pulled after about two hours.

Products and rates for existing customers were still available.

Mohamed El-Erian, former IMF deputy director and president of Queens’ College at Cambridge University, said HSBC made the “very dramatic move” because it believed its sustainability was challenged.

“People expect that the cost of mortgages will go up and you will accelerate your demand for getting that mortgage. Why pay more tomorrow when you can pay less today?

“If you’re HSBC, you see lots of people turn up wanting mortgages and you worry about two things. One is: will I make money on those mortgages? Two is: can I operationally handle these?” he told BBC Radio 4’s Today programme.

Nationwide, the UK’s largest building society, also announced on Friday that it would hike some of its fixed mortgage rates for new borrowing to ensure they “remain sustainable.”

Moneyfacts, a financial data organization, said that several mortgage providers have raised interest rates on loans in the last week.

According to Moneyfacts, the average two-year fixed-rate mortgage rate on the market on Thursday was 5.82%, up from 5.49% at the start of June.

Meanwhile, the average five-year mortgage was 5.49%, up from 5.17% at the beginning of the month.

Some brokers criticized HSBC’s shift, with one claiming that lenders should give a “minimum of 24 hours” warning.

Broker Katy Eatenton, of Lifetime Wealth, said while HSBC did warn they might withdraw products earlier than planned, many brokers she knew could not get on the bank’s website all afternoon, and so were unable to submit any new applications.

“This is becoming a more regular occurrence with lenders and is so hard to navigate giving clients good advice and time to consider products with such tight deadlines,” she told the BBC.

Riz Malik, founder and director at R3 Mortgages in Southend-on-Sea, said the move “really underscored the turbulent times we’re currently facing in the mortgage market”.

Mr El-Erian said as a result “people are getting more anxious”, which would probably contribute to a slowdown in economic activity.

He said the only way to deal with the growing unease was for the government to tackle underlying inflationary pressures in the economy.

“Most central banks made the mistake in 2021 of calling inflation transitory, and transitory is a very dangerous word. If I tell you something is transitory, I’m telling you it’s temporary, reversible, don’t worry about it, don’t change your behaviour.

“But it turned out inflation was persistent and therefore central banks were late and society as a whole was late to adjust to higher inflation,” he told the BBC.