The escalating mortgage price war intensified yesterday as the low-profile Hongkong Chinese Bank (HKCB) lowered its mortgage rate to the prime rate for the first three years of the loan. The 26-branch bank, jointly owned by China Resources (Holdings) and the Lippo Group, will charge customers only interest pegged to the prime rate (8.5 per cent) for the first three years. Starting from the fourth year, the mortgage interest rate will be fixed at 1.25 per cent over prime rate. The normal mortgage rate, which is no longer adhered to by local banks, is 1.75 per cent over the prime rate. Most banks are charging 75 basis points to 1 per cent over prime, about 9.25 per cent to 9.5 per cent. (1 per cent equals 100 basis points.) Hongkong Chinese Bank executive director K. M. Yuen said: 'The 'Easy Mortgage' is structured to facilitate home purchases by providing home buyers with a three-year grace period during which interest is set at the prime rate.' This marks the first time a bank has lowered its mortgage rate to the prime rate level. Banks gradually are slashing mortgage rates to lure customers after an initial round of offering gifts and numerous top-up features. As mortgage loans tend to be long-term commitments which are price-sensitive, banks that cannot offer a competitive rate will lose out. Bank of East Asia announced an across-the-board reduction in mortgage rates to 9.25 per cent to all customers and an enticing referral programme. Wing Hang Bank followed, adjusting rates to the same level.