HSBC pledges £1bn in lending to help first-time buyers

BRITAIN'S biggest bank brought hope to first-time home buyers today with a pledge to lend them £1billion this year.

HSBC will revive the virtually extinct mortgage market for those with deposits of 10 per cent.

Its new deals are below five per cent are the most competitive seen for high loan-to-value borrowers seen since the banking collapse six months ago.

HSBC is offering a lifetime tracker mortgage at
4.59%, or 4.09 points above the base rate, from next Tuesday. There are currently no trackers available to buyers wanting to borrow more than 80 per cent of a property's price.

A two-year fixed rate mortgage of 4.99 per cent will also be available with a £1,499 fee. Customers can cut the fee to £199 by opting for a two-year fix at 5.49 per cent.

The Bank of England has slashed interest rates by 4.5 per cent since last October but customers with low levels of equity have seen little benefit, having been shut out of the mortgage market by banks.

Ray Boulger, of independent mortgage broker John Charcol, welcomed HSBC's new deals, saying they were "streets ahead" of the few products on the market. The cheapest mortgage available to customers with a 10 per cent deposit, from Clydesdale Bank and Yorkshire Bank, is fixed at 5.99 per cent until 30 June 2011 with a £999 fee.

Mr Boulger said the Government should force the three lenders it part or wholly owns - Northern Rock, the Royal Bank of Scotland and the Lloyds Banking Group - to also ringfence cash for first-time buyers.

He said: "Ministers must do that to kickstart the whole market. All lenders have limited funds and it is far more expensive for them to lend to someone with a 10 per cent deposit than a 40 per cent deposit. Legally they must have proportionally more capital in place to counter the higher risk. If the three banks taking state funding enter the market, other lenders will be far more likely to jump in too."

The £1billion HSBC announced today is expected to fund about 9,500 new mortgages. It did not rule out setting aside more for those with 10 per cent deposits. The money is part of £15billion of new lending the bank had allocated for 2009. The loans are not offered to people seeking to remortgage, or to those buying new-build properties.

Joe Garner, group general manager of HSBC's personal financial services, added: "These changes mean we can give customers the best possible deal."