New home buyers face higher mortgage costs after HSBC and Standard Chartered raised mortgage lending rates by 25 basis points yesterday.
Centaline Property Agency said last night that some owners had immediately slashed their asking prices. A 922 sq ft flat in Taikoo Shing was on offer for HK$13 million, a reduction of 7 per cent. Other owners dropped their prices by up to 10 per cent.
The rate rise comes after the Hong Kong Monetary Authority last month increased the cost to lenders of issuing the loans by ordering eight banks to keep more capital in their mortgage business.
A Bank of China (Hong Kong) spokeswoman said the bank may also need to raise its mortgage rates at an appropriate time.
Other banks said they would monitor market conditions.
HSBC announced the best lending rates available on new home loans were raised to between 2.85 and 3.15 per cent, depending on borrowers' credit records, from between 2.6 and 2.9 per cent.
Standard Chartered immediately followed the HSBC rate rise, offering a best lending rate of between 3.1 and 3.5 per cent. The rates are effective from today.
Ivy Wong Mei-fung, managing director of Centaline Mortgage Broker, expects other banks to follow suit in the short term.
Mortgage lending rates were stable or even declining last year, but the cycle might be at an end. Deposit rates in Hong Kong remain stable as liquidity in the region is adequate.
"In view of the current mortgage market conditions and changing operating environment, we have decided that it is the right time to adjust our mortgage lending rates to ensure our leadership in the business and to further strengthen our risk controls," HSBC Hong Kong chief executive Anita Fung Yuen-mei said in a statement.
Robbie Choi Yee-chuen, head of mortgage and secured loans at Wing Lung Bank, said mortgage lending rates had been low for a long time and he expected more banks to increase their rates.
A spokesman for the Hong Kong Monetary Authority said it would not comment on the commercial decisions of individual institutions. "Interest rates are subject to a number of factors and home buyers should be careful and fully assess the impact of an increase in the mortgage rate on their repayment burden."
The authority told eight banks, including HSBC, Bank of China (Hong Kong), Standard Chartered, Hang Seng Bank and Bank of East Asia, 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 risk.
The increased costs on mortgages will be passed to customers, Standard Chartered chief executive Peter Sands said at a press conference yesterday, though the measures would not have much impact on the bank.
The Hang Seng Index fell 1.46 per cent, or 333.95 points, to close at 22,556.65 yesterday.