HSBC advising customers to overpay mortgage payments
In a bizarre move it has been revealed that HSBC is writing to 30,000 of its tracker and variable rate mortgage customers with the suggestion that they consider overpaying on their mortgage. The bank has clearly set out the advantages of increasing minimum payments at a time when mortgage interest rates have fallen to historically low levels. The company has calculated that a monthly overpayment of just £100 on a £150,000 mortgage would decrease the term of the agreement by four years and save nearly £12,000 in interest.
While there is some sense in the overpaying suggestion, with more and more UK mortgage holders seeing their minimum payments reduced, there is concern that HSBC is enticing customers to increase the company's asset base by overpaying on their agreement. Like each and every UK banking operation HSBC has recently experienced difficult trading conditions and a significant increase in income, via the mortgage payment method, could be seen as cheap borrowing for the group.
There has been no comment from the regulators as yet although many expect a formal comment sooner rather than later to clarify the subject and the potential for unsolicited investment advice. While the idea of cutting your mortgage term and reducing your interest payments has sound financial foundations many are sceptical as to why the bank has chosen this route.
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