HSBC 2008 Annual Report Download - page 213

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2008, of which approximately 95 per cent were
fixed rate loans and 87 per cent were first lien. At
31 December 2008, the Mortgage Services business
had approximately 250,000 accounts and
US$28 billion in balances outstanding.
Approximately 59 per cent were fixed rate loans and
84 per cent were first lien.
Further discussion of credit trends in the US
mortgage lending portfolio and management actions
taken to mitigate risk is provided in ‘US personal
lending – credit quality’ on page 212.
HSBC Finance US mortgage lending1
(Unaudited)
At 31 December 2008 At 31 December 2007
Mortgage
services
Consumer
lending
Other
mortgage
lending
Total
Mortgage
services
Consumer
lending
Other
mortgage
lending2
Total
US$m US$m US$m US$m US$m US$m US$m US$m
Fixed-rate ......................... 16,288 43,873 91 60,252 20,146 47,254 106 67,506
Other ................................ 11,339 2,324 35 13,698 16,070 2,970 39 19,079
Adjustable-rate ............ 9,530 2,324 33 11,887 12,361 2,970 37 15,368
Interest-only ................ 1,809 – 2 1,811 3,709 – 2 3,711
27,627 46,197 126 73,950 36,216 50,224 145 86,585
First lien ........................... 23,188 40,334 93 63,615 29,475 43,366 108 72,949
Second lien ...................... 4,439 5,863 33 10,335 6,741 6,858 37 13,636
27,627 46,197 126 73,950 36,216 50,224 145 86,585
Stated income3 ................. 5,667 – – 5,667 8,292 – – 8,292
1 HSBC Finance mortgage lending is shown on a management basis and includes loans transferred to HSBC USA Inc. which are
managed by HSBC Finance.
2 Restated to show HSBC Finance management basis, consistent with the current year, and US balances only.
3 Stated income lending forms a subset of total Mortgage Services lending across all categories.
UK mortgage lending
Mortgage lending in the UK rose significantly in
2008 and overall credit quality was maintained
despite a significant deterioration in the housing
market. The withdrawal of many competitors from
the market and the consequent repricing of mortgage
products allowed HSBC Bank to expand its share of
the new lending market while staying within its
targeted customer segments. In December 2008,
HSBC announced that it will make available up to
US$22 billion of new UK residential mortgages in
2009.
Total mortgage lending in the UK rose
from US$64 billion at 31 December 2007 to
US$80 billion at 31 December 2008. This was
driven by the success of the RateMatcher mortgage
campaign in the first half of 2008 in generating
new business, and an increase at First Direct due
to growth in offset mortgage lending following a
similarly successful campaign.
The maintenance of good credit quality in
difficult market conditions is attributable to the
business model pursued by HSBC in the UK. HSBC
Bank originates virtually all new business through its
own salesforce and does not rely on business
introduced through third parties. Also, HSBC does
not allow customer self-certification of income. The
majority of lending is to existing customers holding
a current or savings account relationship with the
bank. At 31 December 2008, less than 2 per cent of
the bank’s book consisted of lending to purchase
property for rent to third parties, for which the bank
applies higher collateral requirements.
In the UK, affordability mortgages have
experienced relatively low levels of delinquency,
reflecting the different credit profiles of the
customers, compared with those in the US, and the
tighter underwriting criteria.
Interest-only mortgage balances rose from
US$22 billion at 31 December 2007 to
US$32 billion at 31 December 2008, driven by an
increase in balances at First Direct. The majority of
these mortgages were offset mortgages linked to a
current account and are classified as interest-only.
Second lien balances, which were all held
by HFC UK, declined by US$770 million to
US$1.2 billion at 31 December 2008 due to run-off
and severely tighter underwriting criteria. In the first
half of 2008, HFC UK ceased originating loans
through brokers.
The credit quality of the UK mortgage portfolio
remained broadly stable as a consequence of the
business model and underwriting criteria described