(qlmbusinessnews.com via bbc.co.uk – – Fri, 9th June 2023) London, Uk – –
HSBC has temporarily withdrawn mortgage deals for new borrowers in a further sign of turbulent times in the UK lending market.
The measure suggests pressures on lenders to hike mortgage rates.
The bank said it would remove all its “new business” residential and buy-to-let products on Thursday, with deals available again on Monday.
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Rival lender Nationwide said it needed to increase fixed rates to ensure they remain “sustainable”.
Mortgage rates have been rising since recent data showed that inflation was not coming down as quickly as expected.
There have been predictions that the Bank of England will raise rates higher than previously thought, 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.
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Mohamed El-Erian, former deputy director of the International Monetary Fund (IMF) and president of Queens' College at Cambridge University, said HSBC had made the “very dramatic move” because it judged its sustainability was threatened.
“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, Britain's biggest building society, also said it would raise some of its fixed mortgage rates for new borrowing from Friday, which it said would ensure they “remain sustainable.”
Financial data firm Moneyfacts said it has seen several mortgage providers hiking rates on deals over the past week.
On Thursday, the average two-year-fixed-rate mortgage rate on the market was 5.82%, according to Moneyfacts, up from 5.49% at the start of June.
Meanwhile, the average five-year deal was 5.49%, up from 5.17% since the start of the month.
Some brokers criticised the change by HSBC, with one saying lenders should give notice of a “minimum of 24 hours”.
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.
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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.
By Michael Race
