The impact of the government's cooling measures on the residential property market has spilled over to the banking sector.
A mortgage war looks almost inevitable, experts say, as lenders scramble for customers in a shrinking market.
Sources said Citibank - the fifth biggest mortgage lender in SAR - is set to cut its Hibor-based mortgage rate to H+1.7 percent, from H+2.5 percent.
The one-month Hong Kong Interbank Offered Rate stood at 0.28 percent as of yesterday. That means, after the reduction from 2.78 percent to 1.98 percent, Citi will offer the same rate as Standard Chartered Bank (2888), Wing Hang Bank and Dah Sing Bank.
"Local lenders are likely to join the price war in a bid to attract clients whose sentiment was dampened by a heavier tax," said Alan Luk Ting-lung, head of investment advisory services at Hang Seng Bank, referring to the 15 percent buyers stamp duty non-locals must pay now when purchasing a flat.
The BSD is the core cooling measure, which the Hong Kong Association of Banks has blamed for a 30 percent decline in mortgage business of the top three home loan lenders in the territory in October.
This also added to pressure of possible staff layoffs, the HKAB said. The lenders are HSBC (0005), Hang Seng Bank (0011) and Bank of China Hong Kong (2388). The BSD became effective from October 27.
Reports said Citibank will cap its prime-based mortgage rate at P-3.1 percent, from P-2 percent. The prime rate currently stands at 5.25 percent.
The offer will be granted to Citi's select clients whose deposit exceeds HK$1 million.
Fubon Bank also is set to cut its rate to P-3.1 percent early next year, from currently P-3 percent.
Chief economist analyst at mRefferal Sharmaine Lau Yuen-yuen expected more home buyers to use H-based rates, as the Hibor rate has eased in the past two months amid fresh inflow.