Could HSBC match your mortgage rate?

4 June 2009

HSBC has relaunched its popular rate-matcher deal, which offers existing homeowners a new mortgage paying the same rate they currently enjoy.

The rate-matcher offer was originally launched last April when thousands of homeowners coming off cheap two-year fixed mortgage deals were suffering from payment shock. From 8 June, the banking giant will again offer to match your existing mortgage rate as low as 2.49%.

Payment shock is less of an issue in the current climate, with the dramatic base rate cuts seen between October and March this year prompting lenders to lower their rates. However, HSBC says remortgage activity among homeowners has slowed dramatically since the base rate started to fall, with many borrowers preferring to sit on their lenders’ standard variable rates (SVR), which generally track the base rate.

However, at a time when house prices continue to fall, such an approach is risky and could leave you unable to remortgage down the line. This is down to what lenders call loan to value ratios (or LTVs) – that is to say, the amount you want to borrow in proportion to the value of the property. At the moment, the best mortgage deals are generally reserved for people looking to borrow 60% LTV, with anyone looking for 75% plus facing a premium.

If you only have around 25% equity in your property, then falling house prices could push you onto a higher LTV band – subsequently, you will probably end up paying more for a new mortgage when you eventually come off your SVR. If your property falls in value leaving you with less than 10% equity, you may not be able to remortgage at all.
The HSBC deal allows borrowers on SVRs to secure a new mortgage up to six months in advance of drawing down the money. Although only available for a limited time, the bank estimates over one million homeowners either rolling off their existing mortgage deal or already on their lenders' SVR could switch to a lower rate with HSBC's rate-matcher without paying any early repayment charges.

Martijn van der Heijden, head of mortgages at HSBC, says: "With the base rate at its historic low, it's definitely a case of ‘when' not ‘if' mortgage rates will rise. It's in the interest of the millions of homeowners enjoying exceptionally low mortgage payments to think ahead now and ask themselves by how much would rates need to rise, to seriously impact their lifestyle. Anyone who would struggle to get by on an interest rate of just 4% or 5% should really act now."

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?

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. The bank will carry out affordability checks on borrowers and the maximum amount the bank will lend is 75% LTV, and the maximum loan is £250,000.

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 2.49% - so if your current mortgage had a lower rate than this, then you will have to pay more on your new deal.

Minimum interest rates also apply to each fixed period. These are 2.49% for a two-year fix, 3.49% for three years or 4.24% over five years.

Most people who take up HSBC’s offer will have to pay an upfront fee of up to £4,699. 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.


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