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LONDON, June 21 (Reuters) - HSBC has launched whatis thought to be Britain's lowest-ever mortgage deal with aninterest rate of less than 1 percent, raising concerns of areturn to riskier lending practices to try to boost flaggingprofits.
Europe's largest bank is offering customers the chance toborrow money at a fixed interest rate of 0.99 percent for twoyears if they have saved a deposit of 35 percent of theproperty's purchase price, the bank said on Tuesday.
Moneyfacts, a consumer website, said the HSBC product wasthe lowest offered since it began recording product rates.
Facing record-low interest rates and rivals keen to stealmarket share, leading players HSBC, Lloyds Banking Group, Barclays and Royal Bank of Scotland have all signalled aggressive lending ambitions in the searchfor profitability.
But signs of looser lending standards in the crowded marketsfor loans have revived memories of a similar hunt for incomejust before the 2007 financial crisis, which exposed widespreadreckless lending at many banks.
"When I cast my mind back to the three property recessions Ihave worked through, this is the sort of thing I fear to see,"independent housing market analyst Henry Pryor told Reuters.
"It was only a matter of time before lenders who areobviously competing with one another for business came up withever more creative and exciting offerings ... These arepalpitations the body feels before a heart attack," he said.
HSBC denied the product represented a return to riskierlending, saying customers needed a large deposit to be approvedand that lending standards have tightened since the financialcrisis.
Lucian Cook, UK head of residential research at propertyservices firm Savills, said the product would havelimited benefit for many aspiring homebuyers struggling to geton the property ladder in Britain's supply-constrained market.
"The 35 percent deposit requirement ... risks widening thegap between those with and without housing equity. In any event,those accessing this deal will need to plan carefully to ensurethey do not risk being overstretched at the end of the two yearperiod."
Last month, Barclays began offering mortgage enabling buyersto borrow 100 percent of a property price with the help of atemporary deposit by a relative in a linked account, the firsttime a lender has done so since the financial crisis.
Halifax, part of the Lloyds stable, has increased its upperage limit for mortgage borrowers from 75 to 80, against abackdrop of record low rates.
Nationwide, Britain's biggest customer-owned lender, alsoraised its age limit for people paying off mortgages by 10 yearsto 85. (Reporting By Andrew MacAskill and Sinead Cruise, editing byKeith Weir)
