Competition in the personal loan market was stepped up yesterday after Chase Manhattan Bank cut its minimum monthly repayment to what it claimed was the lowest level in the market. The minimum monthly repayment amount for the bank's 'revolving personal loan' product - which was launched last September - has been cut to 2.8 per cent of the outstanding loan balance from 3 per cent. The lowest interest rate for the product remains unchanged at 12 per cent for preferred customers borrowing $150,000 or more, illustrating that the rate war between banks is less fierce. Vice-president Alan Tsang Hing-lun said the cut was to accommodate recent changes in the economy in which borrowers saw slower pay rises but increased mortgage repayment burdens as a result of higher prime rate. 'We had a record of about 240,000 property transactions last year, suggesting a lot of people sold their old properties and bought new, bigger ones, boosting their monthly mortgage repayment burden,' he said. He said the cut would lengthen loan maturity by up to six years, assuming borrowers repaid only the minimum amount, and would also increase the bank's credit risks. He said his bank considered the risk-return situation acceptable. In a bid to boost the bank's resilience for potential asset quality deterioration, it increased general provisions for new loans to 1.25 per cent of the loan amount from 1 per cent.
