Thousands of homeowners in the UK could see their mortgage payments drop after HSBC UK announced a reduction in its standard variable rate (SVR). From Friday, the bank has cut its SVR from 6.99% to 6.74%, marking its lowest rate since January 2023.
The move follows a recent quarter-point cut in the Bank of England base rate, which now stands at 4.5%. The reduction will bring some relief to homeowners who have moved from a fixed-rate mortgage but have not taken out another mortgage product with HSBC.
What does this mean for homeowners?
For many homeowners, this change means lower monthly mortgage payments, particularly for those who defaulted to HSBC’s SVR after the expiration of their fixed-rate term. While SVRs are typically higher than other mortgage products, they offer flexibility as borrowers are not locked into long-term deals.
Oli O’Donoghue, HSBC UK’s Director of Mortgage Lending, explained the decision:
“Following a review, we are reducing our standard variable rate to 6.74%, which will benefit those customers who have chosen to transition onto an SVR after their fixed-rate term has finished.”
However, HSBC has not disclosed exactly how many customers are currently on its SVR mortgage.
What is a standard variable rate mortgage?
A standard variable rate (SVR) mortgage is a type of home loan where the interest rate is set by the lender rather than being directly tied to the Bank of England’s base rate. Homeowners often end up on an SVR when their fixed-rate or tracker mortgage deal expires, unless they remortgage to a new deal.
While an SVR mortgage offers flexibility, it is often more expensive than fixed or tracker deals. Borrowers on an SVR typically have a smaller outstanding balance, as many homeowners seek better rates before their mortgage term ends.
HSBC UK expands mortgage access for Foreign nationals
Alongside the SVR rate cut, HSBC UK has also announced changes to its mortgage eligibility criteria for foreign nationals living in the UK. These adjustments bring the bank’s direct mortgage lending rules in line with those for broker-originated mortgages, which were updated last year.
Among the key changes:
- Indefinite leave to remain (ILR) requirement eased: Previously, both applicants on a joint mortgage had to hold Indefinite Leave to Remain (ILR) in the UK or EU Settled Status. Now, HSBC will approve applications if at least one applicant has ILR.
- Higher loan-to-value (LTV) ratio: HSBC will now allow foreign nationals with ILR to apply for mortgages of up to 95% LTV, up from the previous limit of 75% LTV. This means applicants can now borrow a larger percentage of the property’s value, making homeownership more accessible.
- Gifted Deposits Accepted: The bank has also expanded eligibility for gifted deposits. Now, where at least one applicant has ILR, gifted deposits can be considered as part of the mortgage application. This change may help more buyers, particularly first-time buyers, secure a home loan with financial assistance from family.
How will these changes impact homebuyers?
These updates could significantly benefit foreign national residents looking to purchase a home in the UK. By allowing higher LTV ratios and gifted deposits, HSBC is making it easier for individuals and families to secure mortgages with a lower initial deposit.
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For those already on HSBC’s SVR mortgage, the 0.25 percentage point rate cut will bring some financial relief, though they may still find better deals by shopping around for a fixed-rate mortgage.
What should borrowers do next?
If you’re currently on HSBC’s SVR, it’s worth reviewing your mortgage options to see if switching to a fixed-rate or tracker mortgage could save you money in the long run. Many banks and lenders offer remortgage deals with lower rates, especially if you have good credit and a low loan-to-value ratio.
For foreign nationals, these new mortgage rules could make buying a home in the UK more accessible, particularly for those who previously struggled to meet HSBC’s mortgage eligibility criteria.
Final thoughts
HSBC’s rate cut and updated mortgage rules signal a positive shift for borrowers, especially in a housing market where affordability remains a key concern. While the SVR cut offers some relief, experts still recommend homeowners explore their options to find the best mortgage deal available.
With the Bank of England’s recent base rate cut and other lenders likely to follow HSBC’s lead, further mortgage rate reductions could be on the horizon, making now a good time for borrowers to review their financial plans.
