HSBC mortgage rates increase
HSBC has announced a huge increase in mortgage rates across nearly all of their lending categories including residential and Buy-to-Let mortgages. It is quite clear that this rate rise from HSBC (one of the UK’s big six lenders) will negatively impact a lot of customers, including first-time buyers, remortgage applicants, buy-to-let investors, and those seeking to switch to a new mortgage deal within HSBC. The decision also affects both fixed-term deals ranging from two to ten years, and loan-to-value (LTV) levels from 60% up to 95%, depending on the product chosen at application stage. But with the Bank of England recently cutting its base rate, many homeowners may be puzzled by this upward trend. Why aren’t mortgage rates falling alongside the base rate?
Why HSBC Mortgage Rates Are Rising
Despite the Bank of England’s recent base rate reduction to 4.75% from 5%, there are multiple reasons why HSBC and other lenders may not immediately adjust mortgage rates downwards. While the BoE base rate influences short-term borrowing costs across the economy, mortgage rates are also heavily influenced by additional factors that don’t always align directly with base rate movements. Here are some of the primary drivers affecting HSBC’s rate decision.
Long-Term Funding Costs:
Mortgage lenders rely not only on short-term borrowing costs but also on long-term funding markets, which can be volatile and are influenced by global economic conditions. In recent months, the cost of securing funding over long-term periods has remained relatively high. Bond yields, a common benchmark for long-term funding, are still elevated due to inflationary pressures and uncertainties in global financial markets. This means banks like HSBC are facing higher costs to fund longer-term fixed-rate mortgages, leading them to increase customer rates.
Credit Risk and Economic Uncertainty:
With any kind of money lending, it always comes down to risk! In times of economic instability, lenders often factor in a higher risk premium. With inflationary pressures still affecting household budgets and the potential for a weaker housing market, banks are being cautious. This translates into higher mortgage rates, especially for long-term fixed deals, as lenders try to hedge against potential defaults or financial strain in the future. By increasing rates now, HSBC aims to mitigate its risk exposure in an uncertain economic environment.
Lender-Specific Market Strategies:
HSBC’s current rate adjustments may also reflect its own priorities and strategies for the future. Some banks adjust rates to manage demand, rebalance their mortgage portfolios, or remain competitive against other lenders. HSBC’s rate hike on various fixed-rate deals, including products for first-time buyers, existing residential customers, and BTL borrowers, suggests that the bank might be aiming to moderate the influx of mortgage applications or align its rates more closely with industry trends.
A Detailed Look At The New HSBC Mortgage Rates
The rate changes apply across HSBC’s residential and buy-to-let products. Key changes include:
Fixed-rate increases across LTV bands: Most fixed-rate mortgages at 60%, 70%, 75%, 80%, 85%, 90%, and 95% LTV levels have seen increases.
Duration adjustments: Mortgages with two, three, five, and even ten-year fixed rates are impacted.
Energy-efficient properties included: Even products aimed at energy-efficient homes, rated A or B on the EPC scale, have seen increases in rates, reflecting the bank’s across-the-board approach.
What Borrowers Need To Consider
For existing HSBC mortgage holders or those considering a switch, it’s essential to carefully review the updated mortgage rates with your mortgage advisor. As the new rates will likely result in higher monthly payments. Potential buyers and those looking to remortgage should assess whether locking in a rate now makes sense given the possibility of further changes. If you are in need of mortgage advice and want to speak to an expert in the field, then please give our team a call today to arrange a fee free initial mortgage conversation. We are here to help.
