Hong Kong banks hike rates
Mortgage move by central bank spurs interest increases
Some of Hong Kong’s largest commercial banks in the mortgage loans market said they would raise interest rates following the latest round of mortgage tightening measures by the city’s de facto central bank.
Banks have to set aside more capital when they lend after, at the weekend, the Hong Kong monetary authority (HKMA) raised the risk-weighted floor by 10 percentage points to 25 per cent for new residential mortgage loans.
The HKMA also restricted the amount of loans some property buyers can get when it lowered the loan to value ratio by 10 percentage points, and trimmed the debt servicing ratio.
Standard Chartered said the new measures raised their business costs. “The new requirement on risk management of new residential mortgage loans has increased the cost of doing business,” it said. Standard Chartered and HSBC will both increase the interest rate on their mortgages linked to the Hong Kong interbank offered rates, or Hibor, by 10 basis points to Hibor + 1.4 per cent, effective from today. “We will continue to work within the enhanced regulatory guidelines to ensure that our mortgage lending continues to be prudently managed,” HSBC said. Bank of China Hong Kong will also raise its Hibor-linked mortgage interest rate by the same degree to Hibor + 1.4 per cent, and increase interest rate on mortgages linked to the prime rate, effective from June 5, the bank said.
“As the property price in Hong Kong is surging, the timely adjustment of mortgage rates could help prudently manage our risk,” said Florence Chan, the head of secured and retail lending in the bank’s personal banking and wealth management department. “We will keep the mortgage rates and cash rebate under constant review and do not rule out the possibility of further adjustment.” Hong Kong has one of the most expensive property markets in the world and private home prices keep breaking records, despite HKMA’s eight rounds of mortgage tightening measures since 2009.
HSBC is raising the rate on mortgages linked to Hibor by 10 basis points to Hibor + 1.4 per cent.