Household HSBC Watch

August 23, 2005 By Joe Morgan — THE market for sub-prime mortgages is growing at double the rate of the mainstream market. Mainstream mortgage lending rose by 4.5 per cent last year, while the sub-prime market enjoyed growth of 9.1 per cent, amounting to £41.2 billion of lending, according to Datamonitor. The huge growth has been boosted by the increasing presence of high street banks such as HSBC and Royal Bank of Scotland.

MBNA, the American credit card issuer, is the latest mainstream lender to establish a presence in the market for lending to more risky groups with its acquisition of Loans.co.uk, a broker that promotes secured loans to people seeking to consolidate heavy personal loan and credit card debts. Sub-prime mortgage borrowers typically pay interest charges of 6.75 per cent — a 2 per cent premium over prime deals. Sub-prime credit cards usually charge an interest rate of about 30 per cent.

“MBNA was recently purchased by Bank of America. HSBC, on the other hand, said in 2003 that they would export predatory lending currently and previously practiced by Household International. HSBC bought Household in 2002, closing the sale in early 2003″ said consumer advocates at Household - HSBC Watch.