HSBC offers record mortgage deal at 6.5 times salary as lending rules relax

HSBC has made headlines by announcing it will now lend homebuyers up to 6.5 times their annual income, marking one of the most generous mortgage deals currently available on the high street. The move signals a significant loosening of lending criteria and reflects a growing appetite among major banks to boost homeownership amidst challenging property market conditions.

Eligibility for this enlarged mortgage option is limited to HSBC Premier account holders, a status that requires an annual income of at least £100,000 or an equivalent sum in savings or investments with the bank. Applicants must also provide a minimum deposit of 10 per cent. This bold step positions HSBC ahead of its rivals, with Nationwide offering loans up to six times a first-time buyer’s salary and Halifax extending up to 5.5 times income for high earners who can deposit at least 15 per cent.

Mortgage brokers have observed HSBC’s shift from traditionally conservative practices to a far more generous stance than most British banks and building societies. While such ‘income stretch’ mortgages will undoubtedly help some buyers onto the property ladder, borrowers are being urged to carefully consider the long-term implications of taking on such substantial debt commitments.

Government departments, along with the Bank of England and the Financial Conduct Authority (FCA), have encouraged lenders to increase mortgage flexibility, acknowledging that the average home in England was worth an unprecedented 7.7 times the average full-time salary last year. This move is partly a response to unfavourable affordability ratios that have made home ownership a distant prospect for many. Historically, regulations set in 2016 capped the proportion of a bank’s mortgage lending at more than 4.5 times a borrower’s income to 15 per cent of the total. Efforts to review and potentially relax this cap are ongoing, with banks even allowed to request permission to exceed existing limits while broader reviews are underway.

The lending environment has also been affected by recent FCA adjustments that enabled lenders to cut certain stress test rates. This means banks no longer need to check as stringently whether a borrower could still meet repayments if interest rates were to climb significantly, resulting in increased borrowing capacity for house hunters.

Despite the positive reception from some quarters, experts have voiced concerns over the potential risks associated with returning to higher loan-to-income ratios. They caution that without progress on stagnating real wages and surging house prices, simply allowing buyers to borrow more is unlikely to address deeper affordabilty challenges in the market. HSBC, for its part, maintains that all mortgage applications will continue to undergo rigorous affordability checks before approval.