Bank boss ‘trying to limit the pain’ as mortgage rates continue to rise
It is a really difficult period for mortgage clients, and there is no end in sight to rising rates, the head of HSBC in the UK says Sky News.
The head of HSBC UK has cautioned that mortgage rates will continue to rise but that the bank is “trying to limit the pain.”
In an interview with Sky’s Ian King Live, Ian Stuart acknowledged that 300,000 customers had left fixed-rate contracts this year and that the present market had come as a shock to them.
“If you took out a mortgage two or five years ago, like I did, you’ll be coming off a mortgage rate of about 1.5%, and your new mortgage will cost more like 5%.
“This is not a topic to approach lightly. In the modern UK society, this is a very, very important problem.
He was commenting at a time when most financial markets and experts anticipate that the Bank of England would continue its practise of hiking the Bank rate to battle inflation starting next week.
One of the key causes of those escalating mortgage prices has been the 12 straight hikes to date.
The release of employment data on Tuesday is predicted to increase pressure on the Bank to keep raising borrowing prices because experts anticipate that pay growth picked up in April.
Strong pay raises are viewed by policymakers as a way to advance inflation.
They are also concerned that core inflation will continue to rise despite a decline in more volatile components like energy prices.
A blunt instrument, raising the bank rate.
While it aims to reduce demand and, consequently, price pressures in the economy, it also raises household prices through mortgages because arrangements that track the Bank rate and, later, new fixed rate offers, reflect these costs.
On Monday, data from Moneyfacts.co.uk showed the average two-year fix at a rate of 5.86%.
The five-year percentage was 5.51 percent.
The financial market turmoil that followed the Truss government’s mini-budget of late September added to the growing cost of mortgages.
According to recent analysis by Labour, the average homeowner was paying an extra £150 per week due to the acts of the Bank and the former PM.
HSBC, like its competitors, is concerned about an increase in defaults as the crisis caused by rising housing costs spreads.
While acknowledging that it had recently lost some market share in its efforts to uphold its pledge that its pricing would be responsible, Mr. Stuart claimed that it was prioritising its current clientele.
He made his comments days after HSBC UK disclosed it was attempting to expand the amount of mortgage borrowing accessible after being forced to temporarily stop offering its products to brokers last Thursday.
There was a lot of demand as a result of elevated lending rates throughout the market.
According to HSBC, the decision was made to temporarily remove rates offered through broker services in order to maintain the bank’s operational capacity and uphold its customer service obligations.
All of its goods and tariffs for current customers have not changed, and its broker offerings are once again available.
In his interview, Mr. Stuart also expressed his enthusiasm for the future when the bank relaunched the UK division of Silicon Valley Bank, the start-up lender it had acquired for the pittance of £1 after its US parent failed in March.
He asserted that innovation banking was an essential component for digital companies and gave consumers the assurance that HSBC would uphold its culture and identity while protecting the assets it had acquired.