Bank boss ‘trying to limit the pain’ as mortgage rates continue to rise
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HSBC’s UK boss has warned that mortgage costs have further to rise but it is “trying to limit the pain”.
Ian Stuart told Sky’s Ian King Live it had 300,000 customers coming off fixed rate deals this year and admitted they faced a shock in the current market.
“If you took a mortgage maybe two years ago or five years ago, myself included, you will come off a mortgage rate of around 1.5% and your new mortgage is going to cost something closer to 5%.
“This is not a subject to be flippant on. This is a very, very important topic in UK society today.”
He was speaking as financial markets and economists widely expect the Bank of England to maintain, next week, its policy of raising Bank rate to combat inflation.
The 12 consecutive increases to date have been a main factor behind those rising mortgage costs.
Employment data, due on Tuesday, is tipped to only bolster pressure on the Bank to continue raising borrowing costs as economists expect wage growth to have ticked up further in April.
Policymakers see strong salary increases as a means of fuelling inflation ahead.
They are also worried about so-called core inflation remaining stubbornly high as more volatile elements, such as energy costs, ease.
Raising Bank rate is a blunt tool.
While it is aimed at taking demand, and therefore price pressures, out of the economy, it also adds to household costs through mortgages as they are reflected in deals that track Bank rate and, later, new fixed rate offers.
Data from Moneyfacts.co.uk on Monday showed the average two-year fix at a 5.86% rate.
The five-year figure stood at 5.51%.
The rising cost of mortgages was also exacerbated by the financial market fallout that followed the Truss government’s mini-budget of last September.
Recent research by Labour estimated that the actions of the Bank and the former PM meant the average homeowner was paying an extra £150 a week.
HSBC, like rivals, is fearful of a growing number of defaults as housing costs further fuel the wider cost of living crisis.
Mr Stuart said it was prioritising existing customers though he admitted that it had taken some market share recently as it moves to keep to its promise that its rates would be responsible.
He made his remarks days after HSBC UK revealed it was working to increase capacity for mortgage borrowing after it was forced to temporarily make its products unavailable to brokers last Thursday.
Increased lender rates across the market had resulted in significant demand.
HSBC said it had taken the decision to temporarily withdraw rates available via broker services to ensure the bank could stay within its operational capacity and meet its customer service commitments.
Its broker products are available again and all of its products and rates for existing customers have not been affected.
Mr Stuart also used his interview to speak about his excitement for the future as the bank relaunched the UK arm of Silicon Valley Bank – the start-up lender that it bought for the token sum of £1 when its US parent collapsed in March.
Innovation Banking, he said, was a crucial cog for tech businesses and he assured customers HSBC would maintain its identity and culture, preserving what it had bought.
