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HKMA

Rise in mortgage rates on the horizon

PUBLISHED : Friday, 08 March, 2013, 12:00am
UPDATED : Friday, 08 March, 2013, 5:26am

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Homebuyers can expect mortgage rates to rise soon as measures imposed by the Hong Kong Monetary Authority have raised the cost to lenders of making such loans.

HSBC and Standard Chartered, among the top five banks by their share of the mortgage market in the city, said they needed to reprice these loans because the business had become costlier.

The lenders were among the eight banks ordered by the authority last month to raise the risk weighting of their mortgages to 15 per cent from 10 per cent.

Banks must hold capital to cover a certain proportion of their loans, weighted by the riskiness of those assets.

The new move means the eight lenders must now hold 50 per cent more capital to cover such loans.

The new move means the eight lenders must now hold 50 per cent more capital to cover such loans

Benjamin Hung Pi-cheng, the chief executive of Standard Chartered in Hong Kong, expects the change to raise the cost of mortgages to banks by 0.2 to 0.25 percentage point.

In the long run, that would be reflected in higher interest rates to borrowers, Hung said.

Mary Huen Wai-yi, the bank's country head of consumer banking, said the cost of funds and competition among lenders were the determinants of mortgage rates.

Iain Mackay, a finance director at HSBC in London, told analysts in a conference call that there would be repricing of mortgages over time.

Banks in Hong Kong offer mortgage rates of 2.15 to 2.65 per cent.

Robbie Choi Yee-chuen, the head of mortgage and secured loans at Wing Lung Bank, said that when big lenders raised their mortgage rates, small and medium-sized players might follow.

Patrick Fung Yuk-bun, the chairman and chief executive of Wing Hang Bank, expected some bigger players to raise rates and said his bank would then do the same.