by Mark Johnston
HSBC withdraws mortgage deal.
It seems that lenders are now engaged in a tug of war for mortgage business. It has become more and more apparent that the mortgage rate price war is well under way, with lenders finally competing for business.
The 3 month London Interbank Offered Rate (LIBOR), the rate which banks use to lend to one another, has been reducing since January, meaning it is cheaper for banks to lend to one another.
Some experts also believe that as we are reaching the midyear point where lenders assess how much they have lent, perhaps some have found out how far behind their own targets they are and this too has encouraged them to join in the mortgage war.
Michael Ossei, of uSwitch.com, a comparison website, stated that the “battle for customers has really started to kick off among long term fixed rate deals. Lenders are starting to wise up to what borrowers are looking for and are finally giving them what they want”.
Chief executive of mortgage broker SPF Private Clients, Mark Harris, added “while a mortgage rate war has broken out in recent weeks, with 5 year fixes in particular falling to record lows, these are available only to those with sizeable deposits of at least 40%”.
The overall hope is that lenders new lending appetite along with the governments new ‘funding for lending’ scheme, which will provide low cost funds to banks, will finally put some life back in to the property market.
HSBC initially drew huge media coverage and made waves by introducing the lowest ever 5 year fixed rate of 2.99%.
Comparison website moneyfacts said that the HSBC’s 5 year fixed rate of 2.99% was the lowest it had ever recorded for this type of mortgage when it was launched.
The deal then prompted a price war with Santander matching the rate.
Natwest then set a new record for the lowest ever 5 year fixed mortgage at 2.95% which indicated a ‘race to the bottom’ amongst lenders competing for desirable customers.
Nationwide building society then responded to these deals by introducing a 4 year fixed deal at a rate of 2.89%.
It is worth remembering though that much of this increased competition has been aimed at people with larger amounts of equity or deposits, those who are seen as less risky borrowers.
This all said the HSBC has now said that is leading rate has now been taken off the market after just one month there, as it has used up all the money allocated to fund it.
The bank did however decline to say just how much money it had lent at this particular rate or how many successful applicants there had been.
An HSBC spokesman said of the deal “it was market leading, so it was always going to be attractive. It was designed to bring in business and we knew it would be popular”.
Santander and Natwest have both said they have no immediate plans to withdraw their rates and therefore their loans remain available, well for the time being anyway!
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