HSBC withdraws mortgage deals for new borrowers

By olly

Due to expected rising interest rates, there has been a rapid increase in demand for mortgage deals. This has resulted in HSBC temporarily withdrawing mortgage deals to ensure that they can stay within their “operational capacity” and meet their “customer service commitments”.

Recently, there has been predictions that The Bank of England will raise rates higher than previously forecasted, to 5.5%. This resulted in a rapid spike in demand for mortgages for new borrowers who want to get their mortgage now, before the predicted rate increase. HSBC, who account for almost ¼ of the home loans market, therefore made the decision to temporarily withdraw the mortgage deals offered to new borrowers. The closure was short lived, with deals becoming available again after just being withdrawn for just four days.

The delay on offering mortgage deals means that fewer new borrowers will be willing to purchase a house and get on the property ladder. The higher rate of interest rate (5.5%) should deter some prospective borrowers from taking out loans as they feel unsure as to whether they’d be able to pay back their loan at the higher rate. This benefits HSBC as they then take on fewer borrowers who have potential to default on their mortgage payments, meaning that the bank is more likely to make money on a larger proportion of their mortgages. Additionally, their flows of payments are more consistent, thus improving their confidence when lending money to other consumers. Consequently, stability is created within HSBC, protecting the bank from possible dangers which have been created by the abnormal inflation-heavy market conditions.