HSBC has made a huge change to a popular current account which offers customers cheaper mortgage rates.
Serving over 16million UK customers, the banking giant has revamped the eligibility criteria for one of its key accounts.
The changes make it more difficult for potential homebuyers to qualify for the account and then become eligible for preferential mortgage deals.
HSBC offers three main current account all of which are fee-free.
HSBC’s Bank Account and Advance products offer everyday banking services including overdrafts.
Customers with an HSBC Advance account also receive additional perks, such as selected discounts.
On the other hand, HSBC Premier current account customers benefit from access to cheaper mortgage deals.
For example, a first-time buyer without an HSBC Premier account seeking a 60% loan-to-value mortgage can obtain a five-year fixed rate of 4.29% through a mortgage broker with the bank.
Whereas, a first-time buyer with an HSBC Premier account can obtain the same mortgage at a five-year fixed rate of 4.12%, which is 0.17% lower.
This bank account is tailored to middle-income to wealthy individuals who have higher than average incomes or savings in the tens of thousands of pounds.
However, HSBC has now increased the income and savings thresholds needed to qualify for a Premier account.
Previously, customers who signed up for an HSBC Premier account before September 4 only needed to earn £75,000 a year or hold £50,000 in a savings or investment account with the bank.
This eligibility criteria, made it easier for those with lower earnings but higher savings to qualify.
Since 4 September, however, the requirements have changed.
Now, a customer must earn £100,000 per year or hold £100,000 in savings or investments to qualify.
This means that those who do not meet the income criteria would now need to save double the amount with the banking giant to qualify.
The changes are part of a broader shake-up unveiled by Jose Carvalho, the head of wealth and personal banking at HSBC UK, on November 20.
The retail arm of the banking giant now wants HSBC Premier to cater to customers who have between £100,000 and £2million pounds to invest.
The changes will also introduce new 24-hour-a-day customer service, financial planning tools, as well as travel, international and lifestyle benefits.
Customers who already hold an HSBC Premier current account will not have their accounts downgraded, regardless of whether they meet the new eligibility criteria.
SWITCHING bank accounts is a simple process and can usually be done through the Current Account Switch Service (CASS).
Dozens of high street banks and building societies are signed up – there’s a full list on CASS’ website.
Under the switching service, swapping banks should take seven working days.
You don’t have to remember to move direct debits across when moving, as this is done for you.
All you have to do is apply for the new account you want, and the new bank will tell your existing one you’re moving.
There are a few things you can do before switching though, including choosing your switch date and transferring any old bank statements to your new account.
You should get in touch with your existing bank for any old statements.
When switching current accounts, consider what other perks might come with joining a specific bank or building society.
Some banks offer 0% overdrafts up to a certain limit, and others might offer better rates on savings accounts.
And some banks offer free travel or mobile phone insurance with their current accounts – but these accounts might come with a monthly fee.
Barclays and NatWest also offer premier bank accounts which offer customers with cheaper mortgage rates.
However, both banks have different eligibility criteria.
Barclays requires a customer to earn at least £75,000 a year or have at least £100,000 in savings or investments with the bank.
On the other hand, NatWest requires customers have a sole income of £100,000 a year or a minimum of £100,000 in savings or investments.
Those with a mortgage worth more than £500,000 can also qualify for a NatWest Premier Account.
However, even though premier current account customers benefit from preferential mortgage rates, this does not necessarily mean that these are most competitive rates available on the market.
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
