Staff reporter
The Hongkong and Shanghai Banking Corporation is offering two fixed-interest rate mortgage plans with borrowing costs as low as 3.15 percent to reattract homebuyers, according to local mortgage consultancy firms.
One plan covering the first three years of lending features an interest rate of 3.25 percent per annum and the other five-year option has the rate set at 3.15 percent. The fixed rates are 0.625 and 0.725 percentage points respectively lower than the average borrowing cost of 3.875 percent for existing mortgage plans, said mReferral.
Rates after the period would be equivalent to the prime rate minus 1.25 percentage points. The prime rate now stands at 5.625 percent.
Using the example of a HK$5 million loan over 30 years, borrowers on the three-year plan can save HK$1,752 or 7.5 percent per month and those on the five-year option can save HK$2,025 or 8.6 percent monthly, according to mReferral's calculations.
Centaline Mortgage thinks the fixed rate plans will allow homebuyers to enjoy the rate cuts in advance and ease the repayment burden for borrowers.
With the new plans, the bank can assess its interest incomes more precisely and increase its stability, Centaline added.
It comes after the US Federal Reserve cut interest rates by a hefty 0.5 ppt last week. It prompted local banks to reduce their prime lending rates by 0.25 ppt, the first time since 2019.
Before the rate cut cycle started, Hong Kong lenders saw their profitability squeezed by high interest rates. They tightened mortgage businesses amid the weaker-than-expected economic recovery, including cancelling or slashing cash rebates to nearly zero and lengthening review time.
The cautiousness led the market share of the four major banks in mortgages for completed homes to contract to 63.7 percent in August, down from a peak of 81.4 percent in 2021, data from mReferral showed.
The two plans have fixed rates. Sing Tao
