HSBC in deal with customer to cut mortgage rate

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RATE CUT: HSBC has agreed to reduce a customer's mortgage repayments after he complained about the bank's refusal to pass on successive US rate cuts. (Getty Images)

HSBC Middle East has agreed to reduce the mortgage repayments of a customer after a barrage of complaints about the bank’s refusal to pass on successive US interest rate cuts.

The move could open the floodgates for customers of HSBC and other lenders in the UAE to get their mortgage rates reduced as discontent over banks' unwillingness to pass on interest rate cuts grows.

Dubai-based James Howard had written several letters of complaint to the bank after it failed to lower its variable home loan rate despite the US Federal Reserve lowering the cost of borrowing to 2% from 5.25% last September.

The UAE pegs its currency to the ailing US dollar, which forces the Gulf state to mirror Fed monetary policy in order to maintain the relative attractiveness of the dirham.

“After pressing them and a meeting that I insisted on, I got a reduction to my interest rate. It was certainly not of the magnitude of the Fed rate cuts [but] it seems they can offer different rates to different people,” Howard, a pilot, told magazine Arabian Business.

“When I asked how they could treat me differently from their other customers they said it was okay. It was a revelation to me.”

Howard’s rate reduction was confirmed in an April 14 email from Adrian Quince, regional manager of home finance at HSBC Middle East.

Mortgage customers of the bank are furious that their rates have not been lowered in recent months as the underlying cost of borrowing has declined.

“If all you have to do is complain, everyone would be doing it,” said Nasir Aijaz, a Dubai-based business analyst.

Aijaz said he was already looking at moving his mortgage to another lender, but told Arabian Business he would be pursing the matter further.

“A 0.75% cut would make a significant difference in my repayments over the course of the loan,” he said.

HSBC refused to comment on Howard’s case when contacted by Arabian Business.

“HSBC does not comment on individual cases as it is confidential between the customer and the bank. HSBC does not reduce pricing just because customers complain as our pricing for each product is standard as per terms and conditions," the lender said.

“However we do review each customer complaint and consider all factors the customer has raised before finalizing our decision.”

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USER COMMENTS (3 COMMENTS)

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HSBC Mortgages
Posted by Robert Cumming, London, UK on 24 June 2008 at 19:18 UAE time


Dear Sirs, I wish HSBC to note that upon reviewing the above customers treatment, I will be looking closer at other banks for my own UAE mortgage.

shameless reply from HSBC
Posted by nasir, dubai, UAE on 10 June 2008 at 18:24 UAE time


I just got a shameless reply from HSBC. here is it

"Dear Mr. Nasir Aijaz,


Further to the e-mail dated 5 June 2008 from Mahmoud Baddar, Manager Customer Relations HSBC UAE and with reference to your email dated 2 June to Jersey Financial Services, the issues you have raised have been forwarded to me for review.

HSBC Bank is not in breach of its home loan agreement with you. Therefore I would like to bring your attention to the following:

1) Your agreement dated 25 October 2007 states:
"Each month you must pay interest on the outstanding amount of the Loan at the applicable variable Home Loan rate. The variable Home Loan interest rate may be varied at our discretion at any time."

2) Clause 6.1 of the terms and conditions state:
"6.1 We will charge interest on the Home Loan Debt at the interest rate mentioned in the Agreement. If you have a Variable Rate Home Loan, interest may be varied for the reasons set out in Part B and we will notify you of any changes." The use of the word "may" in these two sections gives the bank discretion over the rate and therefore not reducing the rate cannot be a breach of the Flexi-Home Loan Agreement.

We confirm we are reviewing our interest rates effective 1 July 2008 and changes will be communicated to you shortly.


We assure you of our best attention at all times.

Yours sincerely,


Adrian Quince
Regional Manager Home Finance
HSBC Bank Middle East Limited"

and here is my reply

Dear Mr Adrian,

Thank you for your reply however I am extremely disappointed in the way you are referring to the issue, it seems that the bank just wants to make money by exploiting the customers.

Basically the bank is shamelessly saying that this “may” gives the bank the right to exploit the customers. For a customer all terms include “must pay” and for the bank its always “may”!!. Do u expect the customers to believe that based on this the bank can increase rates whenever the bank wants without a reason.

As you mentioned the word “may” gives the Bank discretion over rates however does this “may” also give the bank the right to discriminate among customers.

Pl confirm whether the bank has or has not reduced the interest rates for Mr. James Howard as per the news item I referred to in my complaint and the mail I send to you today(attached). The news item specifically mentions your name and even the date of your email. http://www.arabianbusiness.com/520933-hsbc-cuts-mortgage-rate-after-barrage-of-complaints

Please also state the condition which has not been met as set out in part B of the agreement as reasons for change in interest rates. The variable interest rate clause also states that “provided that we do not do so for any arbitrary or improper purpose”. I can certainly say that the bank is arbitrarily not changing the rates for the improper purpose of exploiting customers and making unreasonable margins, isn’t it a breach of contract there. All contracts are based on trust and I can certainly see a breach of trust here. Had I not trusted HSBC in that they would honor the basis given in the agreement for change in interest rates I would have not entered into this agreement.

I expect that you will have the courtesy to accept my request for a meeting and explain the bank’s position in person, the date of 1st July is totally meaningless if reduction in rates has already been offered to even a single customer before that. Does this “MAY” you r so proudly referring to was not included in the agreement for Mr James Howard.

Just to point to the level of attention you have put into this matter and after reading your remark “We assure you of our best attention at all times.” Please check my loan agreement again is dated 18th October not 25th October 2007.

Regards / Nasir

Mr Howard HELP
Posted by nasir, dubai, UAE on 2 June 2008 at 22:47 UAE time

I thought having a degree in accounting, having done audits of banks and financial institutions during the early years of my career and working in financial advisory for KPMG made me slightly better in understanding a financial transaction and I would get a better mortgage deal, but after reading this all i can say that I need Mr. Howard to help me out here.

Mr. Howard could you Please help all HSBC mortgage clients!

I thought I did everything right, gave all possible logic to HSBC but to no avail, I could not get HSBC to drop its rates.

I thought making a 25% down payment to HSBC would get me a better rate, but now with 10% down payment with other banks I will get a better deal.

I thought telling them that with the increase in value of property my down payment is worth almost 40% of the property value and the banks’s risk has significantly dropped - nothing doing.

I thought reminding them that fed rates have dropped and as per contract mortgage rate is variable on fed rates. They would listen and take some action – wrong again!

I thought telling HSBC that you have just borrowed over 2.35 billion dirhams at 70 basis points over EIBOR i.e 2.7% and you should transfer this drop in your cost of funds to the consumers would make them realize that they are making huge margins on mortgages – they would not listen.

I tried explaining to them that there is no change in country risk, currency risk or my personal risk profile and they can now feel more secure about their loan.

I thought converting my account into a HSBC Status account would make my request a little more loud and people would listen – no effect again.

I thought making a complain to the Central Bank - Banking and Supervision Department, Ministry of Economy - Consumer Protection Department and Consumer Rights Organization would help but no effect.

Mr Howard please tell us what else I and everybody else should do to get a drop in mortgage rates.

Maybe my thinking that there would be one reasonable person working in HSBC UAE was wrong.

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