Thursday, Apr 09, 2009
HPC is over, 125% LTV will soon be back
Times: HSBC drops interest on low-deposit mortgages
Further signs of revival in the mortgage market emerged yesterday when HSBC unveiled competitive deals for borrowers with small deposits.
Britain's biggest bank announced fixed-rate home loans available for up to 90 per cent of a property's value with rates starting at 4.99 per cent. The next best-buy rate for borrowers with a 10 per cent deposit is from Yorkshire Bank, at 5.99 per cent.
Posted by peter_2008 @ 12:36 AM (1365 views) Add Comment
15 Comments
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1. Rubberneck said...
Nice gesture but if you looker deeper in to the requirement it won't actually be available to anyone under £50k p/a. So, prices still have to drop a bit more yet....
2. charlie brooker said...
With the hundreds of billions being pumped into the British economy by the BoE you'd expect some sort of reaction.
The forthcoming tax tsunami however might stop this in its tracks.
3. drewster said...
Too late. Public sentiment has turned, everybody is waiting for prices to fall further before buying. Very few suckers will be drawn in by this offer.
4. peter_2008 said...
Indeed, this is not as good new for the VIs as the title suggests. The loan is 90% LTV, BUT is capped at 3 time salary and LIMITED only to FTB. Based on current average house price of say, £150,000. You need to earn £45,000 a year and have £15,000 deposite. I don't think there are many FTBs have this sort of finance. I even doubt there are enough people to take the £1Bn HSBC offers. Just another PR.
5. mytimeisnigh said...
I'm in the process of transferring a large sum of money from HSBC as their interest rates are abismal. I hope other savers with them wake up to this. Actually they telephoned me a couple of weeks ago and asked me to make an appointment at the branch to discuss how they could make things better for me. The whole thing was really staged with even the bank manager shaking my hand and asking if I was being looked after. However, all it really boiled down to was that they could not offer me any more preferential treatment than they could to anyone wanting to save £20, so they showed no loyalty to me for my 19 yrs custom and excellent savings balance. I was appalled that they tried to convince me to exchange my cash ISA to a 12 month bond and did not want to reply when I said, but then I will lose my tax free status, they tried to convince me that interest rates would not rise again for a long time. They based the fact that they had the most competitive mortgage deals as a reason why I should continue to bank with them but failed to acknowledge that I could get a mortgage with anyone or with them even if I didn't save with them. Anyway the upshot of the meeting was that it motivated me to stop being lazy and I'm waiting for my money to transfer to other banks offering £3% plus. I think other people have probably stayed with HSBC because it is very secure but irresponsible lending is going to damage this reputation, which really is their only selling point.
6. Sybil13 said...
The deals are at 3 x's income which has to be good news, lenders finally lending at sensible levels long may it last, but anyone buying in todays market with a 15% drop from 2007 peak has to be prepared to lose 35% within a year or more. This deal is capped at £400000 loan, so 15% off a £400000 home would be £60000 off bringing the price to £340000, with a further loss of £140000 in a year, that is quite a loss, so a decision best made not being influenced by the irresponsible spin being put on property by mainstream press
7. inbreda said...
Even if it wasn't capped at 3x income, the difference between a 95% LTV and a 90% LTV, in terms of a deposits purchasing power, would still imply a house price drop of 50%. We've only had about 20%, so this "great news for the VIs" is actually a bit pathetic
8. timmy t said...
"Mortgage experts heralded the announcement from HSBC as a significant step forward in the recovery of the UK market..." Should read "Mortgage experts, whose livelihood depends on a recovery of the UK market, heralded the announcement from HSBC as a significant step forward in the recovery of the UK market..."
Quote from the FT - HSBC said first-time buyers and homeowners with relatively low levels of equity had not so far benefited from the falling cost of borrowing. “By making £1bn available to buyers with deposits of just 10 per cent, HSBC is trying to remedy the situation,” said Joe Garner, group general manager of the bank’s personal financial services.
Don't you just love that about banks... how they put everyone elses interests before their own.
9. mark wadsworth said...
HSBC aren't daft.
Nominally they will give 90% mortgages - if our fictitious FTB with income of £45,000 a year (using Peter's example) wants to buy that average house for £150,000 and only has a £13,000 deposit, HSBC's valuers know they have to factor in another 20 per cent price drop, so they offer him a loan of £120,000 and value it down to £133,000.
Or possibly they are daft.
10. timmy t said...
MW - that thought had occurred to me too. But this will only push house prices down more quickly, which is not in HSBC's interests. Perhaps they think the upside of some positive PR outweighs it? Or maybe they are just daft?
11. little professor said...
"Indeed, this is not as good new for the VIs as the title suggests. The loan is 90% LTV, BUT is capped at 3 time salary and LIMITED only to FTB."
There's also the £1,499 up-front fee, and you have to sign up to their premier current account, costing £12.95 per month.
12. jack c said...
House prices will be down a further 10% based on their processing times (LOL) - I know of several disgruntled applicants - it does give them the opportunity to "cherry pick" nothing more IMHO.
13. Growler said...
Timmy: "which is not in HSBC's interests"
It's in HSBCs marketing interests to be seen to offer the great deal of 90% LTV to FTBs - against the printed 3 x LTV. But if they can get their valuer to value the property lower still - then it's even more in their interest. They'll be "seen" to offer more, but in reality will be hedging at 2.5 x LTV
And who says it's not in HSBCs interests that the market falls further? The further it falls, the less attractive the seller will be since they'll have moved themselves from 50% LTV to higher simply by the fact their property has lost value. Since HSBC are one of the only banks "better run", they'll be one of the only banks that can afford to led to people at this end of the scale. Of course, this only works if you believe that the property market is near to bottom. So if you can screw your "best offer" as in my first paragraph by in camera lowering valuations, you get to have a lot of market at your disposal... ;-)
14. mr g said...
Going slightly off topic, one or two people have asked if HSBC are daft, they are.
Thanks to basic errors by their appalling overseas call centres I have netted £300 in goodwill payments in 18 months and still they make c*ck ups.
15. Wake Up said...
Why does it seem generally accepted on this site that 3x salary means that for the average house price of £150000, a salary of £45000 is required? (assuming £15000 deposit). This is 2009, most FTB comprise of 2 people (usually husband and wife) who are both employed. Gone are the days when just the man goes out to earn the dosh and the woman sits at home doing the housework. Seriously, have a look around at your friends who own houses and you will agree that most are in a relationship and in most cases both employed. I still think prices have a decent bit further to fall, but if you start using pessimistic calculations such as those above to call the bottom, you may end up disappointed.
If you don't believe me, go to the HSBC website and play around with the 'How much can i borrow calculator' with two persons' salaries and see for yourself that neither party needs a salary anywhere near £45000, but instead a salary even as low as £20000 is enough, provided they have a £15000 deposit. (And before you start harping on about people not having £15k deposit, there are a LOT of prudent twenty and thirty somethings who have been holding out for the big crash and saving up deposits of this size). A wise friend who reads this site once said "Neither the VIs or the HPC gang will be proved totally correct, you need to plan on a scenario somewhere in the middle if you want to call the bottom fairly accurately". Makes sense to me.