HSBC has promised to help homeowners suffering payment shock by offering them a new mortgage matching their existing rate.
From 14 April, the banking giant will open up its rate matcher service to all UK homeowners – but for a limited time only.
This means that all borrowers coming off fixed-rate mortgages before 30 June 2008 can switch to HSBC and see their rate matched on a new deal.
However, the bank will carry out affordability checks on borrowers and will only match rates from 4.54%. The maximum amount the bank will lend is 80% of a property’s value, and the maximum loan is £250,000.
Customers will also have to pay a fee upfront, which will be dependent on the interest rate and size of the loan. HSBC estimates that around 72% of customers will pay a fee of £999 or less. However, the maximum fee is a whooping £4,099.
On the plus side, customers in England and Wales qualify for free legals and free valuation, and will not have to pay a completion fee. Customers in Scotland and Northern Ireland will get £400 from HSBC towards these costs.
Martijn Van Der Heijden, head of mortgages at HSBC, said: “Many homeowners are worried about their monthly repayments going up and we can help take away that anxiety.
"Rate matcher helps customers plan budgets over the medium term and eases the shock of seeking new borrowing when old rates expire. We're pleased to be in a position to help."
HSBC is one of the few mortgage lenders not to offer its products through brokers – therefore people interested in applying to get their rate matched must visit an HSBC branch.
What’s the catch?
Earlier this month HSBC-owned First Direct suspended mortgage lending to new customers – now, its parent company is trying to attract new customers by offering this remortgage deal.
It may seem too good to be true – and in one way this is not a silver bullet solution to all borrowers coming off fixed rates.
For a start, you must fit HSBC’s criteria.This bank is known for having a conservative credit scoring system and many people may find they are rejected for a rate matcher product.
And even if you do fit the criteria, you may not get exactly the same rate that you’re already on.
This is because HSBC will not offer a mortgage cheaper than 4.54% - so if your current mortgage had a lower rate than this (which, if it is a five-year fixed it might well do) then you will have to pay more on your new deal.
With the average fixed rate mortgage currently priced around the 6.2% mark, according to Moneyexpert.com, you are still more likely to get a good deal with HSBC than elsewhere.
But don’t take this as read. Most people who take up HSBC’s offer will have to pay a fee of up to £999 – some will pay more. In fact, HSBC says it has set the maximum fee at £4,099 but if interest rates were to increase during the period of this offer, it reserves the right to increase this to £5,000.
It is, therefore, well worth looking at other options before pumping for HSBC’s price matcher, as a mortgage with a higher rate but lower fee might be cheaper for you in the long run.And bear in mind that HSBC will expect you to pay the fee upfront.