HSBC launches mortgage price promise for first-time buyers
HSBC has attached a bold price promise to its market-leading 90% loan-to-value fixed rate and lifetime tracker mortgages.
Between the 2nd of September and the 3rd of November, HSBC has pledged to be 'first for first-time buyers', by matching or beating high-street rivals that attempt to outdo its top rates.
In an extremely competitive environment, where lenders are locked into a race to the bottom, HSBC's move is sure to cause a stir.
Mortgage rates have plummeted recently as a result of the Funding for Lending Scheme (FLS) – a Government initiative allowing banks and building societies to borrow cheaply – as well as the record low base rate.
Now lenders have become fiercely competitive as they try to attract more borrowers.
For example, at the beginning of August HSBC brought out the cheapest two-year fixed rate mortgage ever with an initial interest rate of 1.49% for borrowers with a 40% deposit. But within a week West Bromwich Building Society toppled this rate by offering the same deal for 1.48%.
Now HSBC has addressed this brave new world with a price promise to fend off challengers that could threaten its top-spot in the 90% loan-to-value market.
HSBC is linking its price promise with three existing market leading deals available to first-time buyers with a 10% deposit.
They include a two-year fixed rate at 3.59%, a five-year fixed rate at 4.39% and a lifetime tracker rate at 3.99%.
Each of these deals come with a £999 fee if you are a HSBC current account customer. Non-customers can open a HSBC current account to get access to the same preferential fee or face handing over a whopping £1,499.
The bank has said it will match or beat the rates on 90% loan-to-value deals with booking fees of up to £999.
The price promise
HSBC's existing 90% LTV deals are pretty much superior to everything else out there at the moment, so all this might seem a tad over the top.
For example, the next best rate on a two-year fixed rate deal that I could find was 3.99% from the Post Office, which leaves HSBC's offer 0.49% clear of the competition.
But there are a few catches to the HSBC offer...
The HSBC price promise only applies to mortgages from Barclays, Woolwich, Halifax, Lloyds TSB, Nationwide, NatWest, Royal Bank of Scotland and Santander, but not any of their subsidiaries.
HSBC says these providers represent 81% of the UK mortgage market. This means that HSBC will be able to match or beat four out of five providers on the price of 90% LTV mortgages, but not all of them.
Another caveat is that only the rate has the flexibility to change, not the fees that come with it. So HSBC's two tiers of fees – £999 or £1,499 – are non-negotiable.
However, HSBC says if a competitor matched one of its leading rates but had a lower fee the bank would look to reduce the interest rate in order to maintain its competitiveness.
Finally, this offer is only available on house purchases, not remortgages, and to apply you will need to go direct to HSBC as the bank does not offer its deals through brokers or intermediaries.
How the price promise will work
HSBC says it will be monitoring the market so that rates are matched or beaten automatically.
That means you don't need to have applied and been accepted by the other provider with the better rate in order to benefit from the HSBC price promise.
Whether a deal is beaten or matched depends on the last digit of the rate in question.
HSBC's mortgage rates have to end in either a 4 or a 9. So if a competitor's deal ends in the same way it will be matched.
But if a deal doesn't end with a 4 or a 9 HSBC will move its counter offer to the next rate down that does.
For example, a challenger rate worth 3.58% on a two-year fix would be beaten by HSBC with an offer of 3.54%.
So HSBC's price promise could mean rates are forced up to 0.04% lower than what you find elsewhere.
HSBC hasn't revealed exactly how low it is willing to go, but says it is confident it will be able to match or beat any on sale rates from the major high street lenders.
What are your chances?
It's a bold offer that's bound to get a lot of people interested. But what's the chances of a first-time buyer even being accepted by HSBC?
Well better than you might think.
HSBC says it approves eight out of ten first-time buyer applications. And recent figures released by the Council of Mortgage Lenders (CML) suggests that HSBC is certainly open for business.
HSBC achieved its highest ever ranking for lending volumes in 2012 and reached 4th overall, ahead of Santander and the Royal Bank of Scotland – which is pretty impressive as HSBC doesn't use intermediaries to drum up business.
The CML data estimates that HSBC wrote 11.5% of new mortgages in 2012, up from 9.3% in 2011.
Of the top six mortgage lenders (Lloyds, Nationwide, Barclays, HSBC, Santander and Royal Bank of Scotland) only HSBC and Nationwide increased their lending from 2011 to 2012.
I think this is a very brave move from HSBC that is sure to garner a lot of interest from first-time buyers.
The bank hasn't indicated there is a floor to how low they will go, so it's really thrown down the gauntlet to the eight banks it's challenging on rates.
How they react will be very interesting.
But even though HSBC promises to beat the rates of rivals, it shouldn't stop you from shopping around for the best deal on a mortgage.
It's important to check out the whole of the market, or you could miss out on an even cheaper deal once all the fees and rates have been taken into account.
Also HSBC will only cover 81% of the market so that leaves plenty of other providers that could offer a better deal.
Leeds Building Society for example is offering mortgages that come interest-free for a year, which might be more suitable for you. You can read more about this deal here: Leeds BS launches new mortgages with initial 0% interest period.
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