Zero rate offer as mortgage war heats up
The mortgage war between local lenders is escalating, as Hang Seng Bank joins the fray with a product offering mortgage borrowers zero interest for three months.
It is the first local lender to temporarily abolish interest charges to win market share in the latest round of the mortgage war.
Other lenders, like HSBC and Bank of East Asia, have offered fixed mortgage rates for the first couple of years while Citibank and Chong Hing Bank are offering rate cuts and cash rebates. Analysts said banks used different mortgage packages to attract clients with different needs.
'Banks have cash on hand, but they do not have a lot of good projects to lend their money to,' VC Brokerage director Louis Tse Ming-kwong said.
'This is why they are so aggressive in competing for mortgage loans, which are relatively lower risk than other types of lending.
'This trend is likely to continue as we have seen some property owners launch new projects, and the property market has been active again recently. This provides good opportunities for banks to compete for mortgage business.'
Hang Seng Bank's mortgage plan started yesterday and will run until the end of next month. It allows customers borrowing mortgages of HK$1 million or more to avoid paying interest for three months. But they still need to repay the principal and they must draw down the loan before May 29.
The bank did not say how high the interest rate would be after the initial three-month interest-free period, saying it would be set on a case-by-case basis.
Home borrowers would save HK$7,500 with the offer - provided the loan amount was HK$1 million with a tenure of 20 years and priced at two percentage points below the prime lending rate, or at 3 per cent, a Hang Seng Bank spokeswoman said.
New borrowers or homeowners seeking to refinance could apply for the offer.
'The purpose of the offer is to help new homebuyers to reduce the burden of their interest payment,' the spokeswoman said.
The latest round of the mortgage war started last week, with HSBC announcing a plan to offer fixed-rate options for homebuyers, and other lenders quickly following suit.
HSBC, Standard Chartered, Bank of China (Hong Kong), Bank of East Asia, DBS Bank (Hong Kong) and Fubon Bank (Hong Kong) have launched fixed-rate options for homebuyers, in addition to their traditional floating-rate options, which price the interest rate from the prime lending rate.