Ray Boulger is one of the most respected commentators on the mortgage market in the UK. IFA Magazine had the chance to discuss what HSBC’s decision to stop 90% LTV Mortgages means for the property market.
Boulger was quick to highlight,
“HSBC was the last of the large lenders to continue offering 90% LTV mortgages to all borrowers, albeit with only a limited tranche available each day and a short window each morning for brokers to reserve funds.”
Recent activity shows the property market is stronger now than at any point since the pandemic. I asked Boulger if HSBC’s decision was an attempt to minimise downside risk against the property market suddenly falling, exposing the bank’s book to negative equity.
Boulger responded,
‘If HSBC was seriously worried about the risk of property price declines it would have pulled out of high LTV lending well before now.’
Boulger links part of the surge of activity to the stamp duty holiday. However, this has left many participants in the property market struggling with capacity issues.
‘Despite Bank Rate and swap rates at historically low levels, and the availability of cheap funding from the Bank of England, many lenders have increased mortgage rates over the last few weeks to stem the flow of mortgage applications. These rate increases reverberate across the market as one lender’s rate increase adds to demand for other lenders. Lenders need to balance business at different LTVs, and as HSBC will have been hoovering up a hugely disproportionate amount of high LTV business over the last few weeks, it will now need time to re-balance its business split.’
Boulger concluded,
‘HSBC’s withdrawal from 90% LTV lending will be a combination of these two factors.’
‘Time from application to offer has increased with many lenders and, in line with other lenders, HSBC has to balance its desire to accept more business with maintaining service standards.’
I asked what we can expect from HSBC next,
‘HSBC has told brokers it aims to re-enter the high LTV market in the coming weeks and looks forward to other lenders joining it. The comment about other lenders is pertinent, but I fear the wait will be longer than it hopes.’
Finally, Boulger had one last comment for the UK Government and regulators.
‘For the housing market to operate efficiently, there needs to be a much closer alignment between the supply and demand of mortgages for credit worthy borrowers across all LTV ranges. The extremely limited appetite of lenders to offer high LTV mortgages should be worrying the Government as well the regulators as it prevents credit worthy potential purchasers who don’t have the luxury of help from parents or grandparents from becoming homeowners.’
