HSBC axes 90% mortgages hitting first-time buyers

One of the only banks to offer 10 per cent deposit mortgages has pulled its deals in response to a surge in demand.

HSBC today said that it will temporarily suspend deals for new borrowers with a 10 per cent deposit due to a ‘significant consequence on service levels’ following a significant uptick in new borrower enquiries.

The move has dealt a blow to first-time buyers who typically have smaller deposits and are finding their savings’ purchase power eroded by rising house prices. 

These deals have been few and far between this year after lenders pulled more in the first four months of lockdown than in the entire first year of the financial crisis. 

HSBC today said it will temporarily suspend deals for borrowers with a 10 per cent deposit

HSBC today said it will temporarily suspend deals for borrowers with a 10 per cent deposit

 HSBC today said it will temporarily suspend deals for borrowers with a 10 per cent deposit

HSBC was one of the only banks to continue offering 90 per cent deals throughout this period, but now says it is dealing with so many applications that home purchases are being put at risk. 

This means borrowers with a deposit of just 10 per cent will now have even less choice when attempting to secure a mortgage.  

Lenders pulled over half of all mortgage deals in the wake of the pandemic but in late July both Nationwide and Coventry Building Society began offering 90 per cent loan-to-value deals again.

Experts predicted that more lenders would follow suit in reintroducing these deals, leading to more choice and lower rates for first-time buyers.

However, deal numbers continued to drop throughout August and are now are their lowest point since the pandemic began.

Lenders have mostly blamed staffing shortages forcing them to rein in new mortgage lending and focus on existing customers, with the majority of the country still working from home and a wave of customers requesting mortgage holidays.

Lower deposit mortgages usually take more work to underwrite, as they present a higher risk to the lender. As a result, if staffing problems at banks and building societies lead to deals being cut, it’s these deals that go first.   

How many low deposit deals have been pulled this year? 
Date 85% LTV  90% LTV  95% LTV 
01/03/2020 664 779 391
01/04/2020 311 326 162
01/05/2020 208 100 41
01/06/2020 286 183 31
01/07/2020 356 70 14
01/08/2020 347 68 20
02/09/2020 349 62 14
Source: Moneyfacts 

As of this morning there were just 62 available 90 per cent deals compared to 772 before lockdown was implemented, according to finance experts Moneyfacts. 

However, these figures include the HSBC deals, meaning in reality there will now be even fewer deals available. 

HSBC’s Michelle Andrews said: ‘Mortgage market participation has been volatile at higher loan-to-values which has led to significant consequences on service levels. 

‘The recent significant uptick in applications has meant that we have not been able to consistently meet the high standards we set ourselves, which is not always a positive experience for our customers and can delay and put a property purchase at risk. 

‘As such we continually review our proposition and service levels and adjust how we are working and try to manage the inflow of new cases. Temporarily reserving our mortgages at over 85 per cent loan-to-value for those switching rates only is not a decision we have taken lightly, but one we will be reviewing regularly.’ 

The number of 95 per cent deals has also fallen to just 14 from 391 in March. Of these remaining 14 most are specialist options – for example family assist mortgages – and won’t be available to most borrowers. 

Similarly 85 per cent deals have halved to 349 deals over the same period. 

As of this morning there were just 62 deals left for home buyers with a 10 per cent deposit

As of this morning there were just 62 deals left for home buyers with a 10 per cent deposit

 As of this morning there were just 62 deals left for home buyers with a 10 per cent deposit

Moneyfacts expert Rachel Springall said: ‘Those first-time buyers who had hoped to get a foot on the first rung of the property ladder may well be disappointed to see further contraction in the higher loan-to-value market, where they may be able to afford the required deposit. 

‘As the weeks ahead progress it will be interesting to see whether the market contacts further, or if things improve. 

‘At the moment it is hard to tell but some borrowers might even cancel their plans of home ownership until more products return to the market.’  

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