HSBC Expands Lending Opportunities for Homebuyers
HSBC is set to lend homebuyers amounts reaching up to 6.5 times their annual salary as banks relax mortgage rules further.
This new offering, which became available on Monday, targets customers with HSBC Premier accounts, requiring them to either earn £100,000 annually or hold £100,000 in savings or investments with the bank, plus a minimum deposit of 10%.
It seems that HSBC is the first significant bank to go beyond the six times salary threshold since the financial crisis of 2008. Just last September, the bank raised its limits for first-time buyers to 5.5 times their income.
Similarly, Nationwide has introduced a scheme allowing first-time buyers to borrow up to six times their earnings, while Halifax, the UK’s largest mortgage lender, is offering 5.5 times borrowing for high-income clients who can put down at least 15%.
Aaron Strutt from Trinity Financial remarked on HSBC’s shift from being “one of the most conservative lenders” to now offering more favorable terms than most other banks. He mentioned, “Lenders are eager to do business, but this income-stretching mortgage is indeed significant. Borrowers should be cautious and deliberate about taking on such high sums.”
In recent years, banks and building societies have been urged by the government, the Bank of England, and the Financial Conduct Authority (FCA) to boost lending and facilitate home ownership. Last year, England’s average house price was 7.7 times the average full-time salary, and in Wales, it was 5.9 times.
Since 2016, tighter lending regulations following the last financial crisis limited large mortgage loans. Up to 15% of a bank’s home loans are allowed to exceed 4.5 times the borrower’s salary, with around 9.7% of mortgages in the early part of this year surpassing that threshold.
The bank started a review of this 15% cap in July and noted that lenders could request permission to exceed it, provided the overall industry average remained under 15% during their review process.
This year, under the FCA’s guidance, many lenders have lowered certain interest rate stress tests, making it easier for homebuyers to borrow more, even if rates go up.
While banks argue that larger loan amounts are necessary due to rising house prices, some experts worry that the government might be too quick to relax mortgage regulations put in place after the financial crisis.
James Daly from the consumer group Fairer Finance expressed concerns that current policies appear Treasury-driven. “We want to help people onto the housing ladder,” he said, “but increasing access to credit without addressing fundamental issues could lead to long-term challenges for both borrowers and lenders.”
He pointed out that flat real wages since the financial crisis, alongside rising property prices, are two main barriers for people trying to buy homes.
HSBC has emphasized its dedication to responsible lending, assuring that anyone applying to borrow 6.5 times their income would undergo thorough affordability assessments.
