Introducing a new five-year fix at 3.99%, HSBC has repriced its offer for remortgaging for those who are interested in borrowing 60% of their property’s value. It indicates that individuals have the option to fix their house loan payments each month at a rate lower than the Bank of England base rate, which increased to 4% last Thursday.
The financial market was in chaos as Kwasi Kwarteng introduced a mini-budget last September, which sent the price of the new fixed home loan as high as 6%.
Nonetheless, lenders’ costs for new fixes have gradually decreased in recent months, and some mortgage brokers have gone so far as to claim that there is a “price war” among lenders, with lower rates appearing every day.
In his testimony to MPs, HSBC chief executive Ian Stuart compared the present sub-4% rates to the situation in December, when 60,000 HSBC borrowers from the bank were subject to levels of 7%. The Treasury select committee heard him tell the audience, “If you heard the strain in our customers, the anxiety in our customers was palpable.”
Virgin Money introduced a 10-year fixed-rate mortgage at 3.99% last week; however, many are not enthusiastic about signing up for a deal for that duration.
According to David Hollingworth, an associate director at L&C Mortgages, “it’s a long way from the prospect of rates at 6% or more” for those coming from a fixed-rate mortgage.
The money market’s “swap rates” determine the cost of new fixed income.
The director of Advantage Financial Solution, a Bristol-based broker, Steven Morris, conveyed that it is challenging for his profession since the pricing is changing.
“Every time we apply for a fixed rate for a customer, within no time it’s cheaper elsewhere,” he said. “I am currently on application number six for the same client in a bid to get them the best deal.”
A significant increase in interest in base-rate tracker mortgages has been noted by several brokers from customers who believe interest rates have peaked.
Following a tracker mortgage with no early repayment fees, some advisors advise clients interested in buying a home or remortgaging to switch to a fixed-rate deal.
The MPs at Tuesday’s Treasury select committee meeting are questioning the CEOs of the four largest UK banks regarding the interest rates fixed at 1% on most easy-access savings accounts when the Bank of England has increased the base rate.
“Why are you so ungenerous on instant savers, giving so little back in terms of interest rates, compared to what you charge borrowers?” Angela Eagle, the Labour MP and committee member, questioned the CEOs. “It’s about profitability, isn’t it?”
HSBC’s Stuart, as well as NatWest chief executive Alison Rose, Lloyds Banking Group boss Charlie Nunn, and Barclays UK chief executive Matt Hammerstein, all refuted the charges, stating that fixed savings plans offered more generous rates of around 5%–7%.
They further denied the higher income charges regarding their bonuses. While profits would determine variable compensations, Rose stated, “We would not be able to meet performance targets] by… net interest margin”.
Nunn emphasized that to shield banks from probable borrower defaults anticipating an economic slump, money was set aside that will partially offset increased interest income. “We need to make sure we have financial resilience to support customers through a recession, to have the right capital… And so from an overall profitability perspective, I think that’s important context,” he explained further.
Although the rest of the bosses see no sign of stress as per their mortgage books, Stuart cautioned of further pain ahead. He assured us that they are proactively reaching out to customers who are struggling due to higher remortgage rates. “The headwinds, they are ahead of us. They’re not behind us,” he concluded.
- Published By Team Timeswire