First-time Buyers

HSBC restricts interest-only mortgages to wealthy

Julia Rampen
Written By:
Julia Rampen

HSBC will stop offering interest-only mortgages to all but high net worth customers from 25th March.

The bank has tightened its interest-only residential lending criteria to include only customers with an income of £100,000 or more, or £50,000 in savings held with HSBC, excluding the vast majority of first-time buyers.

Borrowers must also have a premier account with HSBC or open one in order to take out the mortgage.

An HSBC spokeswoman said: “HSBC’s interest-only mortgages are provided to borrowers who can afford a monthly payment including capital, but value the flexibility of an interest-only product.

“With effect from 25th March 2013 customers applying for a residential interest-only mortgage will need to hold or open an HSBC Premier Bank Account and meet the HSBC Premier eligibility criteria. Currently the majority of HSBC’s interest-only mortgage customers qualify for Premier.

“The changes are being made ahead of the Mortgage Market Review (MMR), which is expected to treat interest-only mortgages as a niche product offering when it comes into force in April 2014.”

Existing customers would not be affected, she said.

The news comes after Accord Mortgages announced that it was withdrawing its residential interest-only mortgages from 8pm on Sunday.

It follows a spate of withdrawals from the interest-only space at the end of 2012. Nationwide stopped accepting new interest-only applications in October and was followed by other major lenders including NatWest, RBS, Coventry Building Society and Newcastle Building Society.