Standard Chartered Bank is predicting the price war in the market for home mortgage loans will continue until the end of the year as demand for corporate loans remains sluggish. The head of consumer banking for Hong Kong, the mainland and the Philippines, Peter Wong Tung-sing, said yesterday the bank wanted to see the 8.25 per cent prime rate - the rate charged to banks' best customers - as the limit to how far mortgage rates could decline during the price war. 'We don't really want to see banks writing loans at interest rates below prime because there are a number of risks in front of us as the turn of the millennium approaches,' he said. Mr Wong said further rate cuts would increase pressure on banks to reprice their entire home loan portfolios to lower levels. That, he said, would expose them to higher interest-rate risks because as the new millennium approached, banks would need more short-term funds to prepare for any surprises. Those risks, coupled with the approach of full deregulation of Hong Kong's interest rate regime by the middle of next year, are expected to push up money market rates. However, Mr Wong said Standard Chartered - with a 21 per cent share of the local home loans market - still needed to watch the market closely for movements in mortgage interest rates. He hinted that when other big lenders reduced their rates further, Standard Chartered might be forced to follow suit. 'The market environment has changed dramatically over the last 12 months. Last year, most banks wanted to stay liquid and to write as few new loans as possible. This year, everybody wants to extend his foothold in the home loans market,' he said. 'We very much hope as the local economy resumes its growth and other parts of the region continue to recover, corporate loan demand will pick up and thus release the pressure on the retail banking segment of the market,' he said. While the lending rates have always been the focus of the competition among banks for home loans, some lenders recently started to intensify the war by offering cash incentives to borrowers in the form of repayment-free credit card spending and shopping coupons. Last Tuesday, Po Sang Bank - a member of the Bank of China Group - attempted to break through the pricing floor by offering mortgages at 0.25 per cent below prime for the full loan maturity. The Hong Kong Monetary Authority had warned while the pricing of loans remained the banks' commercial decisions, they should not lower their credit approval standards in an effort to book more loans.