HSBC is considering tightening its mortgage lending criteria as household finances face a squeeze from the energy crisis.
Sources said the bank is assessing whether to impose stricter affordability tests over concerns that high bills will reduce how much customers can afford to borrow.
The bank could change the calculations it uses to determine loan sizes. Banks use internal algorithms to assess how much to lend to a particular customer. They also use data from the Office for National Statistics to work out the cost of spending on utility bills.
It is understood that HSBC is also looking at other ways the looming cost of living crisis could impact borrowers. Households are facing higher tax bills from a hike to National Insurance contributions in April.
Energy suppliers are in talks with Ofgem and the Government over how to avert rapid price rises in the coming months. Industry experts have said the energy price cap could jump to £2,000 in April.
Banking sources said lenders were not “scrambling” to make sweeping changes to lending criteria at this stage. But they warned a spike in energy prices could impact lending to first-time buyers and other borrowers with a low deposit. They said anyone looking to take out a mortgage this year should have their “eyes wide open” to challenges in the energy market.
One source said: “Lenders work on affordability and if part of that is being taken up by higher utility bills it stands to reason that you’ll be able to borrow less. Banks could also increase the energy costs as a weighting in their affordability calculations.
“This will affect people who are at their maximum borrowing capacity, and so the increased energy costs means they won’t be able to borrow as much as they were able to three months ago.
“So it will definitely have an impact on first-timer buyers and anyone borrowing at a high loan-to-value ratio, or anyone who is trying to stretch their income as much as possible.”
HSBC has published advice to customers on how to save money on energy as costs rise. The bank has advised customers to protect their finances by signing up for government support schemes, switching to the cheapest deal and making their homes more energy efficient.
A spokesperson for HSBC said: “Mortgage lending decisions are based on affordability. As a responsible lender, we keep our underwriting criteria under review and our affordability models are refreshed regularly, taking into account key elements of consumer expenditure.”
