Mortgage war could be sparked by HSBC

Earlier this month the High Street bank, HSBC, which also owns the Internet bank First Direct, announced that it was cutting mortgage loan rates even for those with smaller deposits.

This came as many lenders reserved their best deals for those with substantial deposits to put down, making things difficult in terms of affordability for first time buyers who did not have that sort of deposit to put down. However, the bank has now thrown down the gauntlet by announcing its decision to reduce the deposit requirements for its more competitive deals.

The bank announced that it would be putting aside £1 billion to lend to those that had only a 10 percent deposit. Many banks have been looking for deposits of between 15 and 40 percent for their best deals, which first time buyers have been unable to consider. However, it is thought that the decision by the bank to do this will result in more banks reducing deposit requirements for better deals, which could potentially help to get the mortgage and property markets back on their feet.

One industry official said: ‘If HSBC’s rivals start to lose business because of these low rates then they will soon look at ways to counter. If it does spark competition then all the better for homebuyers.’

Some officials have said that Lloyds TSB, another major lender, is already considering following suit. However, according to reports many High Street banks were shocked when the announcement was made, with many worried that they will have to take similar action in order to remain competitive.

An official from HSBC said: ‘This isn’t crazy lending, it’s lending at 90% loan-to-value. Homeowners have shown they want to get on top of their mortgage debt, and although house prices have fallen, and continue to fall, they won’t fall for ever.’

Tags: debt, hsbc mortgages, property, Mortgages, mortgage debt, hsbc, small deposit mortgages, lloyds