Mortgage rates are on the way up at BOCHKBusiness | Winnie Lee 3 Jul 2020
BOC Hong Kong (2388) is said to be raising its mortgage rate under the low interest-rate environment, according to local media reports.
The bank is said to have adjusted up by 0.1 percent the rate for loans worth below HK$6 million to Hibor plus 1.5 percent. The cash rebate rate has been cut from 0.5 percent to 0.2 percent.
This means the two largest mortgage loan providers, including Hong Kong and Shanghai Banking Corporation, have now raised their mortgage rates, which are based on the Hong Kong Interbank Offered Rate.
The capped mortgage rate is maintained at 2.5 percent. For loans between HK$6 million and HK$20 million, the mortgage rate is Hibor plus 1.45 percent. The cash rebate rate is 0.5 to 0.8 percent.
For loans amount above HK$20 million, the rate is Hibor plus 1.4 percent. The cash rebate rate is 1 percent.
Based on the loan amount of HK$1 million, for every additional 0.1 percent interest rate the monthly payment is only about HK$50 more, said Raymond Chong Kam-fai, chief executive at StarPro Agency.
Standard Chartered Bank (Hong Kong) and Hang Seng Bank (0011) may also follow the move this week or next week, local media reported.
The managing director of Centaline Mortgage Broker, Ivy Wong Mei-fung, said the Hibor rate has decreased by half or more, compared with the first quarter but is still slightly higher than the US interest rate.
There may be room for a further decline. However, the cost of bank capital may not necessarily fall synchronously, leading to a reduction in mortgage profits and the risk of narrowing a bank's net interest margin.
Banks are still conservative on mortgages and they tend to raise interest rates and reduce discounts, Wong said. Other banks may also follow the big banks' move, she added.
As a reference, the one-month Hong Kong Interbank Offered Rate ended its four-day decline. It rose from 0.442 percent to 0.46268 percent.
Meanwhile, the mortgages on completed flats reduced by 21.4 percent year-on-year in June, according to the data from the Land Registry and mReferral Mortgage Brokerage Services, but surged 48.8 percent month-on-month to 7,488, back to the highest level of October last year.
The mortgages on flats under construction were up 9.4 percent to 442 in June, compared to the previous month.
For the first half, the mortgages on completed flats were down 24.4 percent and on uncompleted units down 23.2 percent year-on-year, a new low since 2016.