Local bank cuts HIBOR mortgage rate to 3.01pc, but a higher 5.07pc capped rate

A medium-sized local bank has reportedly cut the Hong Kong interbank offered rate-based mortgage rate to 3.01 percent, 0.24 percent lower than offered by most banks in the market.

The lender has adjusted the Hibor-based mortgage rate from Hibor plus 1.3 percent to plus 0.6 percent. 

With the latest one-month Hibor at 2.41 percent, the Hibor-based mortgage rate will stand at 3.01 percent.

For a loan of HK$5 million spread over 30 years with an interest rate of 3.01 percent, the monthly payment would be HK$21,107, which would save more than HK$600 per month.

However, this capped rate is adjusted to prime rate minus 0.3 percent, resulting in 5.075 percent, about 1.8 percent higher than most banks in the market.

Chong Kam-fai, managing director at StarPro Agency, mentioned that while interbank rates recently fell below 2 percent, it is difficult to keep below 2 percent for a long time.

Once the interbank rate rises above 2.65 percent, this plan will no longer be advantageous, he said.

He added that customers choosing this plan are betting against the bank on future interbank interest rate trends.