Mortgage Overview

Parent company, HSBC, has guidelines covering commercial banking including lending to companies involved in mining, metals, energy, chemicals, freshwater infrastructure, forest land and forest products. These policies define activities they will not support (prohibited), and those they will only support if undertaken to a high standard (restricted), as well as other minimum standards and examples of good practice. These are guidelines rather than a strict operations-wide policy.

HSBC’s Group Corporate Sustainability Risk Management team is responsible for providing Sustainability Clearance, developing policies, guidance and processes, training and working with Sustainable Risk Managers Group-wide.

1. Credit Lending 

First Direct offers LTV (loan-to-value) mortgage rates of up to 80%. Its LTI (loan-to-income) rates are 3.5 times gross salary for sole applicants; 3.5 times the higher salary plus 1.5 times the lower salary for joint applicants or 2.75 times the combined gross annual salaries. These rates compare favourably with the FSA’s Turner Review suggestion of a maximum LTV of 90%, i.e. the borrower should have at least a 10% deposit, and an LTI of 3.5 times for sole applicants. 

In assessing applications for unsecured credit, the bank says that credit scoring ‘may’ be applied. This uses information supplied by the applicant as well as that obtained from credit reference agencies. 

No information was found as to whether the bank has a policy to avoid or prevent offering unrequested increases in credit limits to customers. 

2. Debt Warning

The bank issues the following warnings to its mortgage customers:

• ‘Think carefully before securing other debts against your home.’
• ‘Changes in exchange rates may increase the sterling equivalent of your debt.’
• ‘Your home may be at risk if you do not keep up repayments on your mortgage.’

With regard to unsecured credit the bank outlines the consequences of default on personal loans in its pre-contractual terms and conditions. These include sending the customer an initial default notice and the potential disclosure of information about the borrower’s conduct to credit reference agencies. Other pre-contractual warnings include the statement: ‘Missing payments could have severe consequences and make obtaining credit more dificult’.

The bank does not refer customers to the FSA’s Debt Test, but rather to its own budgeting form – which list outgoings against income to see the extent of any imbalance. 

3. Debt Management and Advice

Though it does not specify what debt relief options might be available, the bank refers customers to its ‘trained credit counsellors’, as well as providing a list of external debt advice providers, including the National Debtline and the Citizens Advice Bureau. The bank does not provide a clear set of steps with regard to the repossession process, nor does it outline how it may help customers restructure their mortgage payments. It states that it encourages customers to make contact if they are having difficulty with their mortgage repayments and that it looks at each case individually. 

Also, no evidence was found that the bank offers re-housing advice or liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements with mortgage customers facing repossession.