HSBC is exploiting the turmoil in the mortgage market with an offer to match homeowners' existing deals.

The offer targets some 1.4 million customers who are having to come off cheap fixed-rate deals this year and will face sharp increases in rates from their existing lenders as banks and building societies scrabble to cut their exposure.

Abbey on Monday was the last bank to pull 100 per cent loans and Nationwide recently hiked rates on its two year fixed mortgages from 4.5 per cent to 7.5 per cent.

The bank, Britain's largest, has far less exposure to wholesale funding than its rivals, with a greater proportion of funding from customer deposits and with a strong presence in emerging markets that have been less affected by the credit crunch.

However, its own online UK subsidiary First Direct was one of the first lenders in the stampede out of the mortgage market last week when it closed its doors to any new mortgage borrowers, saying it was a temporary measure to cope with a flood of applicants.

Its subprime lending business in the US - formerly known as Household - has had to take hefty write downs and was one of the first to suffer from the credit crunch.

The bank is also in need of some positive PR having embarrassingly lost a computer disc containing the personal details of nearly 400,000 customers in the post. The disc contained the names, dates of birth and insurance cover levels of customers who hold life assurance policies at the bank.

It currently has only some 3 per cent of the mortgage market. It is gearing up to cope with three times its current level of business ahead of the offer to non HSBC customers for five weeks only.

However, there are some important catches. It is only applicable for people coming off fixed rate mortgages and there will be a fee of £999 or less for 72 per cent of those who get it.

The fee depends on the scale of the mortgage and affordability. Borrowers have to have at least 20 per cent of their own equity in the property.

Banking analyst Alex Potter of Collins Stewart said: "HSBC coud corner the mortgage market this year. HSBC could be offering deals at 2 percentage points below its peers, or over 20 per cent cheaper."

"HSBC has a surplus of funding, predominantly due to its Far-Eastern businesses which are extremely liquid, but also due to its relatively modest market share in UK mortgages. The 20 per cent deposit requirement means it "effectively cherry-picks much of the lower-risk areas of the UK mortgage market."

He said banks such as HBOS, Alliance & Leicester, Nationwide and Northern Rock, which have to rely on wholesale borrowing markets for financing would lose out to HSBC.

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