An imminent rise in interest rates has failed to cool down the intensifying mortgage price war among banks, driven by a lacklustre residential market. A rate rise in Hong Kong is seen as inevitable following on moves in the United States. Leading banks such as Bank of East Asia, HSBC and Hang Seng Bank said they would review their mortgage policy as the price war on private housing intensified. Last week, Standard Chartered Bank offered a rate as low as 2.25 percentage points below the prime lending rate to selected homebuyers of Sun Hung Kai Properties' Grand Pacific Views and Grand Pacific Heights in Siu Lam. These buyers could enjoy a rate at prime minus 2.25 percentage points for the first two years and minus two percentage points for the remaining period until maturity. A Bank of East Asia property loans department spokesman said the bank would study the possibility of offering a rate two percentage points below prime to mortgage applicants throughout the period. The bank at present provided buyers of new residential projects with a rate as low as prime minus two percentage points for the first two years and minus 1.75 percentage points for the remaining period, he said. 'We have to offer similar terms to compete with our rivals even if the profit margin has been squeezed significantly,' he said. 'I do not think the mortgage price war will take a break at the moment.' The spokesman said the prime rate was running at 9 per cent and the interbank rate at 7 per cent. This means banks can achieve a break-even from every loan they grant at two percentage points below prime. However, he said, home-buying interest would not be significantly boosted by banks' preferential terms. Other factors include economic performance, interest rate movement and property prices. HSBC banking general manager Raymond Or Ching-fai said the bank would not cut the mortgage rate across the board. Instead, it would consider offering prime minus two percentage points to selected customers. Homebuyers in the first- and second-hand market now received a mortgage rate as low as prime minus 1.75 percentage points, he said. HSBC, following the Bank of China group's move, last week offered prime minus two percentage points to buyers of government-subsidised housing under the Home Ownership Scheme (HOS). 'The mortgage price war is unlikely to come to an end in view of the weak demand for housing loans,' Mr Or said. Agents estimated property transactions would drop 30 per cent this month from about 9,000 deals last month. It would not be surprised to see banks offer further cuts in mortgage rates to individual customers given the sluggishness of the primary and secondary property markets, Mr Or said. He said the cut-throat competition need not incur losses as the funding cost was different among the banks. 'Nobody is willing to do a loss-making business,' he added. Hang Seng Bank spokesman said the bank would consider offering prime minus two percentage points to customers who applied for large loans. She said the policy would also apply to HOS flat-buyers. There was small room for further cuts in mortgage rate given interest rates were on an upward trend, the spokesman said, adding that the price war was unhealthy. ABN Amro Bank head of consumer banking Lilian Kwan said the bank already offered homebuyers a rate as low as 2.2 percentage points below prime for the first year and minus one percentage point for the remaining period of mortgage. She said the bank had no intention to change its policy at the moment. Liu Chong Hing Bank and Dah Sing Bank said they did not plan to cut their mortgage rates.