HSBC lends more to first-time buyers but be careful!

by Ed Bowsher on 29 September 2009  |  0 comments
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HSBC has made more money available for lending to first-time buyers, but I think that mortgage market newcomers should go elsewhere.

HSBC has been a real force for good in the mortgage market this year as it has seized market share with some cracking home loan deals. The bank's 1.99% mortgage for borrowers with a 40% deposit really shook things up earlier this month.

Today HSBC emphasised that it's not just lending to homebuyers with big deposits. So far this year, the bank has lent £1 billion to purchasers with a 10% deposit and it's now made a further £500m available for the rest of the year.

Sounds good, right?

Well, I'm not so sure. I think it's great that HSBC has injected some competitive fire into the market, and the bank offers some great deals for people with big deposits. But HSBC isn't such a great option for first-time buyers.

It's not that the rates aren't good. HSBC offers a 2-year discount deal at 3.89% with only a 10% deposit required. The problem is that it will probably take you a while to get your mortgage application signed off and you may be rejected. That's because HSBC is carefully scrutinising all the applications coming in and picking the best borrowers.

Our mortgage brokers at lovemoney.com mortgages have been told by several customers that they've been rejected by HSBC after a wait of six weeks.* 

Then the customers had to go and search for a new mortgage deal from another lender.

A long wait isn't the end of the world if you're remortgaging. You've got the time to wait and see if HSBC will give you one of its market-leading deals. But if you're a first-time buyer who is keen to get a particular property, you can't afford to hang around. You need to get your mortgage signed off quickly. Six weeks is too long.

Don't get me wrong, I accept that HSBC has successfully lent money to a fair number of first-time buyers. No doubt, some borrowers have also been got through the system more quickly than six weeks. But if I was buying my first home now, I wouldn't want to take the risk of a long wait or a rejection. I think it's best to look elsewhere.

So where should you go?

Abbey has a good 3-year fixed mortgage at 5.99%. The nice thing about this mortgage is that Abbey pays for the cost of a solicitor although the buyer will still have to pay the fee for things like searches. However, you do need a 15% deposit for this deal, not 10%.

Royal Bank of Scotland also has some reasonable deals for first-time buyers. It's offering a 2-year tracker mortgage at 4.69% and you only need a 10% deposit. If you'd prefer the security of knowing exactly what your mortgage payments will be, you could get a 5-year fixed-rate deal at 5.99% - again with only a 10% deposit.