HSBC 2009 Annual Report Download - page 221

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and private investors and, in 2009, additional sales
of US$4.5 billion of prime adjustable and fixed rate
residential mortgage loans. At the end of 2009,
approximately 32 per cent of the HSBC Bank USA
mortgage portfolio were fixed rate loans and 75 per
cent were first lien.
Further discussion of credit trends in the US
mortgage lending portfolio and the steps taken to
mitigate risk is provided in ‘US personal lending –
credit quality’ on page 221.
UK mortgage lending
Total mortgage lending in the UK increased by
15 per cent on a constant currency basis to
US$102 billion at 31 December 2009, with HSBC
increasing its market share of UK mortgage lending
through the success of the RateMatcher promotion
and other campaigns within the UK secured lending
growth strategy.
HSBC was able both to grow market share and
maintain high credit quality despite adverse UK
market conditions because of the consistent
application of conservative underwriting standards
and constraints on some competitors in growing
their lending exposure. Almost all new business
originations are made through HSBC’s own
salesforce and mainly to existing customers holding
a current or savings account relationship with the
Group. HSBC does not accept self-certification of
income and restricts lending to purchase residential
property for rental.
UK mortgage impairments and delinquency
balances deteriorated slightly but remained at
relatively low levels despite higher unemployment.
House prices recovered, and the portfolio remained
well secured, reflecting the continuing benefit from
management decisions taken in 2007 and 2008 to
reduce market share when property prices were
rising to unsustainably high levels. In the HSBC
Bank Mortgage Portfolio, excluding First Direct, the
percentage of loans that were 30 days or more
delinquent declined from 1.8 per cent at
31 December 2008 to 1.6 per cent in 2009. The
average loan-to-value ratio for new business in this
portfolio in 2009 was 54.6 per cent, a decrease
of 4.2 percentage points on the previous year.
Interest-only mortgage balances increased by
21 per cent to US$45 billion compared with 2008,
driven by an increase in balances at First Direct
following marketing initiatives, and competitive
pricing. The majority of these mortgages were offset
mortgages linked to a current account for which
delinquency rates remained at very low levels.
Second lien balances, which were all held
by HFC Bank Ltd (‘HFC’) in the UK, declined by
17 per cent to US$1.1 billion at 31 December 2009
as the portfolio was placed in run-off during the
year. Within this portfolio, two months or more
delinquency rates increased from 6 per cent at
31 December 2008 to 6.6 per cent at 31 December
2009, despite a decline in delinquencies in dollar
terms as balances declined at a faster pace.
The following table shows the levels of
mortgage lending products in the various portfolios
in the US, the UK and the rest of the HSBC Group.