HSBC aims to grow its UK mortgage market share

11th April 2008
By IB Staff Writer

HSBC is guaranteeing to match the rate of maturing short-term fixed mortgage deals held by UK homeowners over the next few weeks. While the majority of lenders are restricting mortgage credit, HSBC is going after remortgagers of its competitors. Indeed, the current competitive landscape is providing the lender with the opportunity to increase its market share.

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HSBC has announced that it will extend its Rate Matcher service, as from April 14, 2008, to non-existing HSBC mortgage customers who are coming to the end of their fixed rate deals. The Rate Matcher service was introduced by HSBC at the start of February 2008 for the sole benefits of its existing mortgage customers. The lender guarantees to match the rate of mortgage customers' existing fixed rate deals, which can be as low as 4.54%, for a further two years, provided they are due to mature before June 30, 2008.

In return, customers are required to pay an upfront booking fee to match their old fixed-rate. The fee could range between GBP499 and GBP4,999 depending on the loan amount and the current rate. HSBC will provide customers for whom the fee required to maintain the same rate exceeds the GBP4,999 mark with an alternative offer. According to the lender, more than 70% of customers will pay a booking fee of GBP999 or less. The Rate Matcher service is available on residential mortgage loans not exceeding GBP250,000, and with a maximum of 80% loan-to-value.

The current economic climate in the UK has provided HSBC with the ideal time to extend its Rate Matcher service to all homeowners. At present, highly indebted mortgage borrowers are facing a difficult situation, as the ongoing credit crunch is having a number of repercussions on the UK mortgage market. Despite several successive cuts in the base rate, lenders have re-priced their mortgage products upward, partly due to higher funding costs. As a result of limited funding and a heightened aversion to risk, lenders are currently turning down an increasing number of customers, even those with a good credit history.

However, HSBC seems to be bucking the trend with its competitive Rate Matcher offer. While profitability rather than market share is the priority for most lenders, HSBC appears to be focusing on volume. This is not to say that the lender is sacrificing profitability or taking higher risks; after all, it is charging those customers who do take advantage of the service a booking fee which can go up to GBP4,999. Moreover, HSBC is being conservative in its lending criteria, targeting homeowners with at least a 20% home equity.

Even though it is by far the biggest British bank, HSBC is a relatively small mortgage player in the UK market. In 2006, it was ranked eighth in the mortgage market and was responsible for less than 4.0% of total gross advances. The current competitive environment provides a good opportunity for the firm to capitalize on and grow its mortgage business, given that it has a significant deposits base and depends less on external funding sources than many of its competitors.
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