James PuahToday HSBC says it has stopped accepting any new retail banking customers in New Zealand and will be telling existing customers to start engaging with other financial services providers.
HSBC says it’ll wind-down its New Zealand wealth and personal banking business over several years.
Home Loan Customers Will Need To Refinance
On the HSBC website it states that existing home loan customers with a fixed-rate maturing before 13 September 2023, HSBC will offer a further fixed rate term for a maximum of 6 month which is designed to allow time for customers to apply for finance elsewhere.
If your fixed-rate matures after 13 September 2023 then they say that your home loan will move onto the variable/floating rate on the maturity date and will remain on the variable/floating rate while you identify a new financial services provider to refinance with.
If you have a very low home loan rate that is fixed for a while yet then you may not be in a hurry to refinance, but you might want to check that you still fit the criteria in case there are changes that you have to make before refinancing your HSBC home loan.
Effectively they are forcing you refinance your existing HSBC mortgage as nobody wants to be stuck on a variable/floating rate for too long, and especially if you have a large home loan.
Who Should I Refinance My HSBC Mortgage To?
That’s a very good question, and especially if you have most of your banking with HSBC.
As mortgage advisers we can check that you fit the various banks criteria and can let you know what choices you have, but if you have a choice then you should carefully consider what bank you refinance to and go with what will be best for you.
You have the option to shift to the best mortgage, but what is the best mortgage?
The best mortgage would be one that offers flexibility so that you can manage the loans as your circumstances change over time and yet gives you the ability to pay the loans off faster in those periods when you can. It should be with a bank that has a good reputation too.
Consider The Key Features A Good Mortgage Should Have
When trying to establish what is the best mortgage type to have you need to consider what you want with your mortgage, and for the purposes of this article we will assume that you want to be able to pay it off as fast as you can and save a huge amount too.
We are talking about a home loan here – your goal may be different with a mortgage on an investment property, a mortgage used for business or when you never plan to have the property or mortgage for any length of time. We are also not talking about bridging finance or when specialist finance is needed.
These are the key features that your home loan should have:
- Revolving Credit Facility – when used properly these can be used as the main loan funding facility. It does not need to have a large limit, but it gives you the control of the loans and flexibility to adjust the repayments, the ability to save a fund lump-sum repayments and also to build up a back-stop. These facilities are great for pre-planning for a change in your financial situation like starting a family, returning to education or training and a change in jobs or careers.
- Fixed Loans – the interest rates are almost always lower on a fixed loan and the nature of being “fixed” gives the comfort and ability to budget. Most people want to have most of their lending on fixed rates for these reasons and it’s always best to split up your mortgage into two, three or more fixed loans too as that gives added flexibility.
- Ability to Increase Repayments – with all home loans you can increase the repayments when your loans are at the floating rate (higher rate) but there are less options when you select a fixed rate. Almost all banks allow you to increase your repayments on fixed loans, but many are quite limited. Some will limit you to ‘say’ 5% of the total mortgage, or $15,000 per year but what you want is a mortgage type that allows you to increase each loan by ‘say’ $1,000 a month so if you have your mortgage split into five loans you have five opportunities to increase the repayments to a total of $5,000 a month extra which is $60,000 per year.
- Increase Repayments Without Shortening Loan Terms – unfortunately with most banks when you increase any repayments by default the bank shorten the loan term. This sounds fine at first, but a mortgage is a long-term commitment and things will change over time so you will not want to be forced into a situation when you need to make larger repayment’s because of this. Specifically if interest rates increase, or your income reduces – both of these are quite common and cause a lot of issues.
- Ability to Decrease Repayments – while it’s good to be able to increase repayments on a fixed loan, having the ability to decrease the repayments as well gives people the confidence to do increases beyond what they may have done otherwise. This alone can mean you will end up doing larger increases and therefore save more.
These may differ from why you went to HSBC, as they tended to focus on special low home loan rates rather than features like these. In our opinion these features listed here are the main and arguably the most important features that will help you save the most on your mortgage – more important than just the best interest rate today.
Get Started Now – Know Your Options
There is no reason to wait too long, and even HSBC are telling you they want you to start engaging with other financial services providers. You may be a few months away from when your mortgage comes off the fixed term but it would be worth starting to make plans now even if you do not intend to shift just yet.
As a mortgage adviser I can help find you the best mortgage to replace what you had with HSBC.
It costs you nothing to refinance your HSBC mortgage to another bank as the banks pay me a commission, so really you are getting the advice and out time at no cost.
