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Kenneth Ko

FOLLOWING ABN-AMRO Bank's lead in dropping the standard mortgage lending rate to grab market share, Chase Manhattan Bank has teamed up with estate agents to get referral mortgage business with reduced rates.

  Chase has reached a gentleman's agreement with some branches of real estate agency Centaline Agencies under which any mortgage business referred by the agency will enjoy a half percentage point off the normal rate.

  Under the agreement, the maximum amount of each loan will not exceed $3.5 million and the agent must refer at least five cases each month to the bank.

  The pilot scheme runs until March next year. The bank is negotiating with other agents and even law firms specialising in property deals to draw up similar agreements.

  'We only offer this benefit to agents and lawyers with whom the bank has an established relationship,' a spokesman for the bank said.

   L & D Associates and Ricacorp Properties confirmed they too had been approached by Chase.

  Shih Wing-ching, director of Centaline Agencies, said there was no formal agreement between Chase and his company on the mortgage arrangement.

  He said his company's branch offices, approached by Chase, were responsible for referring clients to Chase's preferential mortgage offer.

  'The offer may make it easier for home-seekers to make a purchase. It is unlikely to stimulate activity immediately but buyers will be more selective in choosing banks for mortgage loans,' he said.

  Although the offer has been available for only a few days, some buyers have already taken advantage.

    Mr Shih said Chase's offer reflected that some of the banks hoped to do more mortgage loan business, especially with an increase of deposits and a decrease of mortgage lending in recent months.

  'This may develop into a trend as other banks follow suit for competition,' he said. The increase in interest rates made it an attractive business, even with a discount offered.

  Bankers who were taken aback by ABN-AMRO's extensive publicity of lowered mortgage rate on old flats earlier this month were not surprised.

  'These two banks do not have a high exposure to the mortgage market and have plenty of room for expansion,' said a banker.

  He believed they were coming into the market at a time when other banks had full books on mortgage lending, given the 40 per cent guideline from the Hong Kong Monetary Authority (HKMA).

  HKMA advises banks to keep their exposure to the property market to 40 per cent of their total loan portfolios.

 'Besides, Chase is probably thinking of securitising its mortgage loans later on when its book becomes full,' the banker added.

   Others perceive the risk of entering the market at this time as relatively low.

  Wong Kim-bon, associate partner of Knight Frank Kan & Baillieu, said due to the fall of residential prices since April, the potential risk of mortgage loans was slimmer than earlier this year.

  'If an individual can afford the down-payment of a purchase, they should be able to afford the monthly mortgage repayment. Such loan business is quite safe,' he said.

  Other banks, especially those with limited exposure in mortgage business, might follow Chase to offer preferential loan services, he said.

  But banks with strong mortgage exposure were unlikely to follow suit, he said.

  Mr Wong said the interest rate was still a secondary concern to home-seekers and the initial concerns for buyers were whether they could afford a home and whether they believed prices had bottomed out.

  Some estate agents, which have not been approached by Chase, also hoped to be involved in the bank's offer which might be helpful in drawing home-seekers to agents' doors.

  Other estate agents reckoned that the preferential rate offer might be a prelude to a relaxation of the mortgage lending policies in the longer term.

      If mortgage business remained weak, some of the banks might pressure the Government for a lifting of the 70 per cent mortgage limit, Mr Shih said.



Chase strikes deal with estate agencies for lower mortgage rates