Homeowners to feel pinch as Hong Kong banks hike mortgage rates

BOC (Hong Kong), HSBC and Hang Seng Bank raised rates by 10bp.

Hong Kong’s top mortgage banks - HSBC, Bank of China (Hong Kong) and Hang Seng Bank - are hiking their mortgage rates by 10 basis points (bp) effective August 13 in a move that signals the end of the city’s ultra low interest rate environment and more pain for aspiring homeowners, reports South China Morning Post.

New mortgage borrowers from these banks will have to shell out an additional $50 per month for every $1m of loan for a 30-year tenure.

The move comes on the heels of Citibank’s first mortgage rate increase in over ten years of 10bp. 

Hang Seng Bank is raising its prime-based mortgage rate to prime minus 2.75% and for Hibor-based mortgage to prime minus 2.65%.

Bank of China (Hong Kong) said it would hike the cap for Hibor-linked new mortgage applications to the best lending rate minus 2.65%, whilst it will also increase prime rate-linked new mortgage plan to best lending rate minus 2.75%. Standard Chartered is increasing the rate for Hibor-linked mortgage plan to prime minus 2.9% and also increase the cap for the best lending rate to prime minus 3%.

Wing Lung Bank and China Construction Bank (Asia) also raising their mortgage rates from August 9.

The across-the-board rate increase has been widely anticipated by the market amidst the tighter monetary policy being charted by the SAR in order to prop up the struggling Hong Kong dollar.

The one-month interbank interest rates, which is often used as a benchmark for building mortgages, has grown from 0.22% in 2015 to 0.85% in April. Banks like Bank of East Asia, ICBC, HSBC and BOC (Hong Kong) have already scrapped their fixed-rate mortgage plans in response to surging interbank lending rates.

“We should not expect that the ultra-low interest rate environment will continue unabated. We must carefully consider whether it is possible to cope with the increase in interest expense on loans, and we must also pay attention to the increase in interest rates to asset prices,” Financial Secretary Paul Chan said in an earlier blog post.