HSBC Storms into the 90% LTV market

HSBC has today announced that from next Tuesday it will be offering a couple of 2 year fixed rates and a lifetime tracker up to 90% LTV for purchasers only. The 2 year fixed rate options are 4.99% with a £1,499 booking fee or 5.49% with a £199 booking fee and the tracker is at Bank Rate + 4.09% for term with a booking fee of £999 and no early repayment charges. HSBC has initially set aside £1bn out of the £15bn they plan to lend this year for these deals. There are very few mortgages on the market for people with a deposit of only 10% and no others for a tracker mortgage. Furthermore the few other lenders offering such deals are not shouting about it and so this launch from HSBC is exceptionally good news for both first time buyers and those wanting to move house but who are constrained by the lack of equity available in their own property to use as a deposit. It is also encouraging that HSBC is prepared to actively publicise the deals, whereas one gets the distinct impression the other lenders offering 90% LTV mortgages would really prefer borrowers went elsewhere. Like almost every other lender HSBC has greater restrictions on mortgages for new build properties and their maximum LTV for new builds is 75%. Hence these deals will not be available to anyone buying a new build property. There are plenty of cheaper mortgages on the market for people with a big deposit but all 3 of these mortgages are easily market leading at 90% LTV and very competitive for anyone wanting more than 75% LTV. The next cheapest 2 year fixed rate available up to 90% LTV is 5.99% with a £999 fee, available from Clydesdale and Yorkshire Bank. Despite HSBC having no competition in the 90% LTV tracker market an indication of how competitive their lifetime rate of Bank Rate + 4.09% is can be gauged from the fact that the only other major lender offering trackers above 75% is Nationwide and for purchases up to 80% LTV it offers Bank Rate + 4.43% for 2 years or 4.53% for 3 years, both with a £995 fee. For most people the 2 year fixed rate offers better value than the tracker, although the tracker rate is initially a little cheaper. However, it will only take a 0.5% or 1% rise in Bank Rate for the tracker to be more expensive. More importantly, after 2 years borrowers on the fixed rate will move onto HSBC’s Standard Variable Rate, which at 3.94% is currently 0.65% cheaper than the tracker rate and the gap is more likely to widen than narrow in future. This is because as Bank Rate rises I expect most lenders not to pass on in full all of the rate increases. Anyone borrowing 90% of their property value should assume they won’t be able to remortgage for at least 2 years in view of their very limited equity and so this is a really important consideration. A condition of these deals is that borrowers must have an HSBC Plus or Premier Account, although this can be opened in conjunction with the mortgage and so it is not limited to existing customers. The Plus Account is the cheaper of the two and costs £12.95 per month (£9.95 for the first 3 months) and so this cost needs to be included when comparing these deals to others. However, with the mortgages so far ahead