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HSBC will give the mortgage market a boost today with a promise to increase the amount it lends next year.
The move is being welcomed by government ministers who have been trying to encourage banks and building societies to resume lending in the hope of getting the moribund housing market moving again.
The Bank of England governor, Mervyn King, said recently that getting banks lending again was the single most pressing challenge facing policymakers. Alistair Darling, the chancellor, will ratchet up pressure on banks this week to pass on the recent interest rate cuts to their customers to kickstart the market.
HSBC is enlarging its planned mortgage fund in Britain to £15bn, a 20% increase on this year and almost double the amount it lent in 2007. The bank was one of the few to pass on the entire 1% cut in interest rates last week, although it only reduced its standard variable rate by 0.8% in response to the previous 1.5% cut by the Bank. But the additional funds available will not necessarily make it easier for homeowners or first-time buyers to get a loan.
HSBC said it had seen an opportunity to increase its share of the market as others pulled back during the credit crunch, but it would not be relaxing its lending criteria. Most first-time buyers will still be required to find a 10% deposit, although some other banks are demanding deposits of up to 25%.
HSBC has traditionally been a marginal player in mortgage lending, and has about 4% of the market. But the bank, which is in a better financial shape than most of its rivals, has been one of the most aggressive lenders in the past year and accounted for 15% of new lending.
HSBC is the only one of the UK high street banks that has not gone cap in hand to raise new money from shareholders, and neither has it been forced to take taxpayers' money.
Paul Thurston, HSBC's UK managing director, said the bank "has no intention of closing its doors to customers". HSBC lent £7.8bn in mortgages in the UK in 2007 and £12.8bn this year. It has 350,000 UK mortgage customers.
John McFall, chair of the Treasury select committee, said: "I'm extremely pleased to see HSBC's initiatives this weekend. Making money available for lending is one of the most important economic issues facing us today."
The government has told banks accepting its £37bn bailout that they must continue to lend at last year's levels. But the volume of money being lent continues to shrink. Figures released last week showed new mortgage approvals fell to just 32,000 in October, the joint lowest number on record. Overall mortgage lending fell to just £459m, a third of the £1.49bn lent in September and down from the £8bn lent a year ago.
End of price forecasts?
The Council of Mortgage Lenders is considering whether to abandon its annual house price forecasts because of the dramatic reduction in homes changing hands. The industry body is finalising its predictions for mortgage activity and the number of homes at risk of repossession next year, amid signs that repeated cuts to interest rates are failing to reignite the housing market. But experts say forecasting house prices - which some say could fall by up 25% next year - is becoming increasingly difficult because of the marked slowdown in the number of transactions.
Jill Treanor
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