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Peggy Sito

The mortgage price war has intensified with the announcement by four banks of revised home-loan packages with lower lending rates.

 The latest batch of cut-price offers - by Standard Chartered Bank, Citic Ka Wah Bank, Bank of East Asia and Wing Lung Bank - comes at the same time as growing fears over rising US interest rates.

 The moves were also in response to price cutting last week by the SAR's biggest home-loan lenders HSBC and Hang Seng Bank.

 Standard Chartered Bank yesterday introduced a fixed-rate mortgage at 6.75 per cent per annum for the first six months of the loan - 1.75 percentage points below the prime rate.

 Standard Chartered said the loan would be at one percentage point below the prime rate from the seventh to the 60th month, and prime thereafter.

 The prime rate currently stands at 8.5 per cent.

 Analysts said the offer was aimed at customers concerned about a rise in Hong Kong's prime lending rate if the US Federal Reserve raised rates.

 Citic Ka Wah Bank joined the fray, offering a rate 0.75 percentage points below prime for the whole loan period, plus a cash subsidy equal to 0.5 per cent of the loan amount.

 Bank of East Asia is offering a rate 0.65 percentage points below prime for the whole loan period.

 It is also offering an option allowing customers to change mortgage schemes within three months of their loan application approval.

 Wing Lung Bank said it had revised down its lending rate to 0.625 percentage points below prime from 0.5 points below prime previously.

 HSBC and Hang Seng Bank last week offered home loan rates at a rate 0.625 points below prime for the whole loan period.

 Kenneth Tsin Wai-lun, a mortgage department deputy manager at Bank of East Asia, said: 'The price war on home mortgages is intensifying.'  Competition was expected to last for the first half of this year, he said.

 Reluctant to lend to corporates due to an uncertain business outlook and attracted by the high quality of Hong Kong residential-mortgage assets, banks have been competing fiercely for home loans, driving rates to unprecedented lows.

 The Hong Kong Monetary Authority has expressed concern over the effect on banks' profitability, and last year threatened to intervene if the competition got out of hand.

 Mr Tsin said the risk of home mortgages was relatively low compared to trade financing or corporate lending.

 Therefore, banks would continue to compete for mortgage-loan customers.

 In general, every 0.25 point reduction would save a homebuyer $156.90 per month on a loan of $1 million over 20 years.

  Hong Kong Property Services (Agency) managing director Michael Choi Ngai-min said the reduction in mortgage rates would give a psychological boost to homebuyers.

 However, he said homebuyers would likely assess the market before deciding whether to take a loan.

 Mr Choi forecast more smaller banks would offer lower rates to compete with big banks and expected to see further preferential offers after the Lunar New Year, when developers would start to offer new projects.

 However, G.K. Goh Securities banking analyst Steven Chan said the price war would slow as corporate lending demand picked up in the third quarter this year.



Home-loan war escalates as banks cut rates further