HSBC bucks the lending trend

In a move that will have surprised many market analysts the major UK back HSBC has announced plans to increase its mortgage lending in 2009. Despite the current downtrend in both lending and housing sales the bank clearly sees an opportunity to be exploited, and it could be that this speck of light at the end of the tunnel may spur other lenders into looking at the future with renewed optimism.

£15 billion earmarked
HSBC has announced an intended £15 billion for use as mortgage lending in the year to come, a figure that is twice that it has lent during the year of 2007. The intention is to take a bigger slice of the market as the bank goes head to head with the major lenders in the market at a time when lending was expected to crawl to a halt.

With the credit crunch leaning hard on banks the HSBC move is somewhat unexpected, and will be watched closely by others in the market.

Prices to fall further
The financial crisis has been relatively kind to HSBC, one of the world’s biggest international banking corporations, and this has given it a good leverage point with which to attack the mortgage market. Using internal resources the bank intends to finance lending without resorting to the troubled world financial markets, and advantage that stands it in very good stead in the current climate.
Estimates have come to the conclusion that the lending could result in over 100,000 home loans in the next year, a welcome boost in a market that is currently floundering with little evidence of upturn.
However, HSBC have made it clear they are not aiming their investment at new home loans, but at those who are already borrowing and need to borrow to move or re-mortgage on an existing property. The bank will also continue to inflict higher interest rates on smaller borrowers and fully expects house prices to continue the current rate of decrease.

Business lending increase
In addition to the market boosting mortgage lending increase HSBC has declared an intention to lend an extra £1 billion to the business arena, particularly in support of smaller British businesses.The business world is in need of some support as it weathers the worst of the credit crunch, and the smaller business is very much at risk in the current financial climate. This action may be in response to a government request for banks to lend to businesses in an effort to give the industrial market a much-needed injection of optimism.

The bank is intending to lend the money to businesses that are basically sound but may need an injection of cash to tide them over a difficult time, and HSBC sees this as an area that is much in need of help as well as being a sound investment opportunity. It is accepted that many small businesses need hard to come by working capital at the moment, and HSBC has recognised this and taken a step to help those in the most need.

Notably HSBC was not in need of any of the recent bail-out from the UK government, and a spokesman explained that the £1 billion for businesses was part of a worldwide initiative to help smaller businesses.

Will the HSBC mortgage lending help the housing market?
While a welcome initiative by a major bank the promise of extra mortgage lending is tempered somewhat by it being aimed at current borrowers rather than new applicants; the money is not going to kick start the housing market as it will not address the vital first time buyer, yet it will be a welcome injection of much needed cash into a currently starving market.

It remains go be seen what the impact of this initiative will be, but it must be taken as a positive move that will be watched with interest by rival lenders with an eye on the future market.


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3 Responses to “HSBC bucks the lending trend”

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