HSBC pledges £1.5bn to 90% mortgages

Wednesday, 30 September 2009 10:30

HSBC has pledged to increase the amount of cash lent on 90 per cent mortgages to £1.5 billion.

Mortgages at 90 per cent LTV are for home buyers only.

Martijn van der Heijden, head of mortgages at HSBC, said: "Demand has been very strong and we have reached the [lending] target, so we are now committing another £500 million to this vital segment of the market.

"Houses prices seem to have bottomed and rates are low - and many of those who put off their purchase last year are starting to look around again."

Data from the Council of Mortgage Lenders (CML) show the average first-time buyer now borrows £112,745 on a 75 per cent loan-to-value (LTV) mortgage.

This puts the average first-time buyer property at £150,326.

At this level, HSBC's total 90 per cent funding will provide mortgages for 11,087 buyers at 90 per cent in 2009 as a whole.

This compares with a total of 83,000 properties sold in August.

So, on the whole the increase in funding is welcome, but the full effect and to suggest it is a major change in the lending climate may be premature.

Hannah-Mercedes Skenfield, mortgage spokesperson at moneysupermarket.com, said: "The last year has seen lenders place far too much emphasis on equity over affordability, and so it is encouraging to see HSBC grow its 90 per cent LTV lending book."

She added HSBC is currently the cheapest 90 per cent LTV lender in the market - but its fees are higher than the competition.

HSBC's 90 per cent deals include a two year fix at 5.99 per cent and a five year fix at 6.49 per cent - both with fees of £599.

The two-year discount tracker is at 3.89 per cent with £1199 fees and the lifetime tracker is at £999.

This compares with the Royal Bank of Scotland 90 per cent two-year tracker at 4.69 per cent with no fees, and Furness Building Society's 4.94 per cent three-year discount tracker with £699 fee.

Yorkshire Bank has a 5.99 per cent tow-year fix with £999 fee and NatWest is offering a five year fix at 5.99 per cent with no fees.

Lower rates are available - between 1.99 per cent to 2.99 per cent- but LTV values are limited to just 60 per cent in cases.

"With the Base Rate still at 0.5 per cent and LIBOR hovering around the same mark, one might expect lenders to be offering better deals for first time buyers, but they just don't seem willing," said Ms Skenfield.

"The main issue continues to be supply rather than demand, with too few lenders opening the purse strings at a reasonable rate."

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