HSBC cuts rebate on mortgage transfers

Business | Tereza Cai 28 Jun 2019

The Hongkong and Shanghai Banking Corporation reduced its cash rebate rate from 2.07 percent to 1.5 percent for customers transforming their mortgage to HSBC, regardless of the amount of the mortgage, and capped the lending interest rate for the transformed mortgage at 2.475 percent, up 10 basis points, reflecting banks' pressure in the face of the rising Hong Kong Interbank Offered Rate and expected US interest rate cuts.

Taking a HK$4 million mortgage as an example, customers who transfer their mortgage from other banks to HSBC could merely obtain HK$60,000 cash rebate now, down 27 percent as compared with HK$82,800 which could be given under the previous policy.

In a bid to attract customers, banks typically offer a cash rebate and a preferential interest rate for customers who transfer their existing mortgage to them from other banks.

Sharmaine Lau, chief vice president at mReferral Mortgage Brokerage Services, expects other banks to follow suit.

The 0.1 percent rise for the transferred mortgage means that customers need to pay 1.31 percent more per month for every HK$1 million transferred mortgage, while the interest rate is still 20 basis points lower compared with two years ago.

Centaline Mortgage Broker managing director Ivy Wong Mei-fung said that cutting down the cash rebate is partly because the rebate offered by banks' is as much as 2.1 percent, a high level in recent years, so customers transfer mortgages after the two-year penalty period to gain the rebate, which in turn reduces the banks' earnings.

Due to the huge market demand for the Hong Kong dollar recently, Hong Kong Interbank Offered Rate increased, and banks' willingness to retain capital also rose, with the saving interest rates and lending interest rates rising at the same time, Wong explained.

She added that some banks, including HSBC, had raised their fixed-term saving deposits interest rates, which could also lead to fund cost increases in the market.

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