HSBC 2008 Annual Report Download - page 214

HSBC HOLDINGS PLC
Report of the Directors: Risk (continued)
Credit risk > Areas of special interest > Mortgage lending / US personal lending
212
above. Additionally, HSBC Bank is now benefiting
from having intentionally reduced its market share in
2006 and 2007 as property prices continued to rise.
The portion of mortgages with a loan to value ratio
greater than 90 per cent declined as virtually no new
loans were originated at this level. The average loan
to value ratio for new business in 2008 was 58.7 per
cent, the lowest for 5 years.
At HSBC Bank, 30 days or more delinquency
rates were unchanged from 31 December 2007 to
31 December 2008 at 1.8 per cent.
The following table shows the levels of
mortgage lending products in the various portfolios
in the US and the UK, together with the rest of the
HSBC Group.
Mortgage lending products
(Unaudited)
UK
Rest of
Europe US
Rest of
North
America
Hong Kong,
Rest of
Asia-Pacific
and Latin
America Total
US$m US$m US$m US$m US$m US$m
At 31 December 2008
Residential mortgages ................................................. 78,346 8,921 80,946 17,437 57,687 243,337
Second lien mortgages ................................................. 1,160 2 14,614 803 503 17,082
Total mortgage lending ................................................ 79,506 8,923 95,560 18,240 58,190 260,419
Second lien as a percentage of total mortgage lending 1.5% – 15.3% 4.4% 0.9% 6.6%
Interest-only (including endowment) mortgages ........ 33,782 553 – 1,427 993 36,755
Affordability mortgages, including ARMs ................. 4,740 824 28,571 311 4,166 38,612
Other ............................................................................ 153 – – – 82 235
Total interest-only and affordability mortgages .......... 38,675 1,377 28,571 1,738 5,241 75,602
– as a percentage of total mortgage lending ........... 48.6% 15.4% 29.9% 9.5% 9.0% 29.0%
Negative equity mortgages1 ......................................... 367 – 7,655 86 1,635 9,743
Other loan to value ratios greater than 90 per cent2 .... 6,178 107 35,296 1,737 2,122 45,440
6,545 107 42,951 1,823 3,757 55,183
– as a percentage of total mortgage lending ........... 8.2% 1.2% 44.9% 10.0% 6.5% 21.2%
At 31 December 2007
Residential mortgages ................................................. 85,356 10,309 98,928 20,065 54,410 269,068
Second lien mortgages ................................................. 1,930 – 17,590 1,256 748 21,524
Total mortgage lending ................................................ 87,286 10,309 116,518 21,321 55,158 290,592
Second lien as a percentage of total mortgage lending 2.2% – 15.1% 5.9% 1.4% 7.4%
Interest-only (including endowment) mortgages ........ 32,314 602 – 174 1,335 34,425
Affordability mortgages, including ARMs ................. 8,695 685 40,201 219 4,993 54,793
Other3 ........................................................................... 241 27 – 274 621 1,163
Total interest-only and affordability mortgages .......... 41,250 1,314 40,201 667 6,949 90,381
– as a percentage of total mortgage lending ........... 47.3% 12.7% 34.5% 3.1% 12.6% 31.1%
Negative equity mortgages1 ......................................... 646 – 11,079 107 525 12,357
Other loan to value ratios greater than 90 per cent2 .... 10,969 211 42,246 679 1,333 55,438
11,615 211 53,325 786 1,858 67,795
– as a percentage of total mortgage lending ........... 13.3% 2.0% 45.8% 3.7% 3.4% 23.3%
1 Negative equity arises when the value of the loan exceeds the value of available equity, generally based on values at origination date.
2 Loan to value ratios are generally based on values at origination date.
3 Balances at 31 December 2007 have been restated to exclude mortgages in the UK that are fixed for a period of time before reverting to
a standard variable rate.
US personal lending – credit quality
(Unaudited)
The deterioration in credit quality which began in the
sub-prime mortgage portfolio in 2006 accelerated in
2008 and spread across the remainder of the US
personal lending portfolio as the economy
weakened, levels of unemployment and personal
bankruptcy filings rose, and house price depreciation
became more pronounced (the S&P/Case-Shiller
10-City Composite Index of house prices showed a