Source:
https://scmp.com/article/741877/interesting-times

Interesting times

For the past two years, mortgage interest rates have remained at ultra-low levels, but some analysts anticipate an upward trend later this year.

In fact, a few leading lenders have recently readjusted their mortgage rates, suggesting the interest rate cycle may have turned.

Market leaders HSBC and Bank of China (BOC) recently raised their borrowing costs for the Hong Kong Interbank Offer Rate (Hibor). BOC raised its rates from 0.8 per cent to 0.9 per cent, capping it at 1.2 per cent, with the highest level at prime minus 2.7 per cent.

HSBC amended its rates to Hibor plus 0.9 per cent, with a cap of 1.2 per cent, while the Bank of East Asia and Citibank have also made similar moves.

However, Hang Seng Bank has suspended its Hibor-based mortgage and is focusing on prime-based mortgages.

This month, mReferral Mortgage Brokerage Services set its rate at 1.68 per cent for fixed mortgages - the lowest in town - for the first 18 months, followed by prime minus 3.1 per cent (actual rate at 2.15 per cent), or Hibor plus 0.8 per cent.

The offer caters to clients of Midland Realty and Hong Kong Properties. Indeed, mReferral's figures show fixed-rate plans accounted for only a small portion of the market.

Sharmaine Lau, chief economic analyst of mReferral, says: 'The mortgage rate won't be low forever. [Any rise in interest rates will be] based on factors such as whether QE2 [Quantitative easing, which saw the United States Federal Reserve pumping in US$600 billion in November to kick-start growth in the world's biggest economy] is effective or [if] QE3 is needed.'

More than 92 per cent of mortgage rates in Hong Kong are Hibor-based, which is significantly lower than fixed-rate mortgages.

According to Ivy Wong, managing director of Centaline Mortgage Broker, rates this year may remain low and stable, but would 'definitely' go up in the mid- to long-term.

'I reckon this may happen as far as in the fourth quarter of 2011, or the first quarter in 2012,' Wong predicts.

'It may rely on the performance of the US market. Hibor has been the mainstream mortgage loan option now as the rate is lower than the fixed-rate [mortgage]. With the expectation [of] Hibor rates rising, fixed-rate mortgage plans may [be a preferred option for homebuyers].'

Buggle Lau, chief analyst at Midland Realty, says: 'It is important to note that the possible further credit tightening on the mainland could have an impact on liquidity, which in turn is likely to lift Hibor rates.'

Based on mReferral's statistics, properties priced above HK$5 million account for nearly 30 per cent of the mortgage market, compared with less than 10 per cent in 2005/2006 when the rate stood at 5 per cent.