HSBC to the rescue?
HSBC has offered to match the mortgage rate of remortgagors facing payment shock this year. Barney McCarthy finds out if the move is too good to be true
As a homeowner coming to the end of your mortgage term, you may be bracing yourself for a nasty surprise when you come to remortgage. The Bank of England Base Rate has steadily risen over the last couple of years (save a couple of recent cuts) and the credit crunch has made lenders a bit more particular with their mortgage criteria. Either way, you can probably expect the interest rate on your new mortgage to be a couple of per cent higher than that of your old one, meaning a painful hike in your monthly repayments.
But all is not lost. HSBC this week (April 14) made its Rate Matcher mortgage available to all UK homeowners, subject to certain affordability criteria and for a limited period only. For the next five weeks, non-HSBC customers will be able to apply for Rate Matcher, which promises to equal rates as low as 4.54% for a further two years.
Check the small print
However, before you start salivating over the prospect of stable repayments at a relatively competitive rate, the HSBC offer is restricted to 80% of the property’s value and the maximum loan is £250,000, which may make it of limited use to remortgagors in the South East. The size of the fee is dependent on the interest rate and size of loan, but HSBC estimates that three-quarters of borrowers will pay £999 or less. Like all of HSBC’s UK mortgages, it will not be available through brokers, only through the bank’s branches.
Martijn Van Der Heijden, head of mortgages for the bank, says: “Many homeowners are worried about their monthly repayments going up and we can help take away that anxiety. Rate Matcher helps customers plan budgets over the medium term and eases the shock of seeking new borrowing when old rates expire.”
Warm reception
The move has been largely welcomed by the mortgage industry, even if it has been regarded as a cute bit of marketing as much as a genuine lifeline to struggling borrowers. Louise Cuming, head of mortgages at moneysupermarket.com, says: “This clever move will enable HSBC to dwarf lending by its competitors in the short term. It is a bold decision in the current environment where some providers are falling over themselves not to feature on best buy tables. However, when an offer looks too good to be true, it usually is and HSBC requires a 20% deposit and will only accept applications that fit strict criteria. Overall though, this is a short-term marketing triumph and, amid the credit crunch gloom, this will seem like a lifeline for many homeowners.”
Even brokers have been magnanimous about the move, despite the fact they don’t stand to benefit. Andy Pratt, chief operating officer of Alexander Hall, says the Rate Matcher offers a very good deal to those that fall within its criteria. “Borrowers will have to be quick as there will be queues round the block and the bank will be inundated with calls,” he says. “There will be a lot of customers it won’t help, but it had to cut the amount (£250,000) off somewhere to limit the levels of business it will receive as a result. It’s a positive move and the right thing to do.”
It is easy to be cynical and dismiss Rate Matcher as a marketing ploy, but the groundswell of opinion seems to rate the HSBC deal positively. And with the mortgage market reeling from multiple blows dealt by the credit crunch since last year, the move certainly seems both bold and brave.
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Tags: Credit crunch, Mortgage rates. payment shock, remortgage
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