Mortgage rate rise viewed as a one-off by the market
10 basis point rise last weekend unlikely to deter borrowers, or dampen sky-high property prices
The decision by many of Hong Kong’s largest banks to raise the interest rates they charge on mortgages last weekend is not expected to spark a trend towards further rate rises, market watchers have told South China Morning Post.
“The rises were a response to regulatory tightening measures by the HKMA (Hong Kong Monetary Authority), rather than a change in the market,” said Daniel Shih director for research at property agency Colliers International.
Raymond Yeung, chief economist for greater China at ANZ, agreed the current environment implies rates will remain low.
“The macro conditions continue to favour low interest rates, as there is ample liquidity in the money market,” he said.
While there is plenty of money available for banks to borrow from each other, experts also suggest there is no pressing need to raise interest rates, to attract additional funding.
Fierce competition for mortgages in Hong Kong puts pressure on banks to keep their interest rates low.
Last Friday evening, however, Standard Chartered broke ranks and announced it would raise rates on its Hong Kong interbank offer rate (Hibor) linked mortgages by 10 basis points to 1.4 per cent above the benchmark rate, effective Monday.
“The new requirement on risk management of new residential mortgage loans has increased the cost of doing business,” the bank said.
“To ensure effective management of risk, we will lift the Hibor-linked mortgage interest rate.”
HSBC and OCBC Wing Hang later announced the same percentage move and timing, while Bank of China Hong Kong (BOCHK), Hang Seng Bank and Bank of East Asia said that their rates would rise to hibor plus 1.4 per cent, but effective from June 5. Citibank and Dah Sing Bank, however, said they would make no changes to their lending rates.
The HKMA has twice issued tighter regulations on mortgage borrowing this month, in an attempt to cool Hong Kong’s record-breaking property market.
The banks themselves are also concerned about the rising prices, said Florence Chan, head of secured and retail lending for personal banking and wealth management at BOCHK.
“As property prices in Hong Kong keep on surging,” she said, “the timely adjustment of mortgage rates could help prudently manage our risk.”
However, Shih does not think the small rise in interest rates will do much to dampen the relentless rush for property in Hong Kong.
“I don’t think an increase of just 10 basis points will have a significant effect on people’s willingness to buy property,” said Shih.
Over the weekend, thousands of home buyers once again formed long queues, to snap up units of K & K Property’s Victoria Skye at Kai Tak, and Cheung Kong’s Ocean Pride in Tsuen Wan.