HSBC Market Data

Further signs of revival in the mortgage market emerged yesterday when HSBC unveiled competitive deals for borrowers with small deposits.

Britain's biggest bank announced fixed-rate home loans available for up to 90 per cent of a property's value with rates starting at 4.99 per cent. The next best-buy rate for borrowers with a 10 per cent deposit is from Yorkshire Bank, at 5.99 per cent.

HSBC has earmarked £1 billion of funding for new mortgages up to 90 per cent loan-to-value (LTV), which it estimates will translate into about 10,500 home loans. It has committed to approving £15 billion of new mortgages in 2009, double the amount it lent in 2007.

Mortgage brokers hope that the deals will kick-start competition for higher LTV deals, which have all but vanished in recent months.

The number of deals available to borrowers with a 10 per cent deposit has dwindled from 1,197 last year to only 95 today, according to Moneyfacts.co.uk, the financial website.

Instead, banks and building societies, including those which are state or majority-state owned, have been demanding deposits of up to 40 per cent for the best rates.

Mortgage experts heralded the announcement from HSBC as a significant step forward in the recovery of the UK market, which has slumped over the past year. Rival lenders have been caught on the hop by the new rates, which are significantly cheaper than other deals on the market.

Lloyds Banking Group, the majority taxpayer-owned giant that controls 30 per cent of the UK mortgage market, is reviewing its deals. It charges borrowers with a 10 per cent deposit 6.29 per cent.

Royal Bank of Scotland, which is 70 per cent-owned by the taxpayer, unveiled a new deal last week for borrowers with a 10 per cent deposit that was fixed at 5.99 per cent for five years. Northern Rock will not lend to any borrower without a minimum deposit of 15 per cent.

The deals unveiled by HSBC are for new purchases and are capped at £400,000. Loans will be limited to a maximum of 3 times income.

However, the lender has been criticised for the strings attached to the new mortgages. Only HSBC Plus or Premier current account customers can apply for competitive new rates. HSBC Plus, a packaged account, costs £12.95 a month. Premier accounts have no monthly charge, but customers are required to earn at least £75,000 and hold at least £50,000 in savings and investments with HSBC.

The cost of joining HSBC Plus over two years is more than £300, which buyers have been urged to factor in when comparing the deals with other loans on the market.

Melanie Bien, director of Savills Private Finance, the broker, said: "Moving your account is a hassle but these rates are competitive and considerably better than the rest of the market. HSBC is in a unique position because it has come through the credit crunch as one of the stronger lenders.

"These new rates lay down the gauntlet to other lenders to lower rates, although most other banks and building societies are unlikely to be able to compete."

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