Mortgage rates have crashed to their lowest level in recorded history in Hong Kong and slashed about HK$4,500 off repayments on a typical monthly home loan since the latest retreat in interest rates got under way. And with further cuts to interest rates widely predicted, homeowners stand to get even more relief before the end of the year. At today's standard rate of 4 per cent - 2.5 percentage points below the prime lending rate - borrowers pay a monthly instalment of HK$6,059 on a HK$1 million loan with a 20-year maturity. In early 1998 when the standard mortgage rate was 11 per cent, the monthly instalment would have been HK$10,321. But despite the sharply reduced borrowing costs - which have made it cheaper to buy an apartment than to rent one - bankers and analysts believed weak consumer sentiment could keep loan demand on a leash and postpone a recovery in property prices. HSBC Securities Asia analyst Derek Cheung said Hong Kong's property market had become desensitised to interest rate movements with people's concerns about job security overriding the appeal of buying homes at cheaper rates. Responding yesterday to the latest 25 basis point cut in United States interest rates, Hong Kong banks cut their prime lending rates by a similar margin to 6.5 per cent. In most cases savings rates were simultaneously cut by a wider 50 basis point margin, to 1.75 per cent. Until July 3 this year interest rate cuts were orchestrated by the Hong Kong Association of Banks (HKAB) under the old interest rate regulations. Since the scrapping of the regulated cap on savings rates last month, banks are free to move independently but in practice continue to act largely in tandem. Driven by cut-throat competition for mortgage business - in the absence of loan demand in other sectors - most new home loans are now priced at rates that float at 250 basis points below prime. This means mortgage rates will now fall to 4 per cent. 'That is the lowest level ever,' said Bank of East Asia (BEA) deputy chief executive Joseph Pang. Before the post-Asian crisis retreat in interest rates got under way, the prime lending rate peaked at 10.25 per cent in January 1998, according to data compiled by the Hong Kong Association of Banks. At that point mortgages were being written at a premium to prime lending rates. Typically that premium would have been at least 100 basis points, and assuming a home owner raised a HK$1 million loan repayable over 20 years at 11.25 per cent at the time, the monthly repayment would have been HK$10,500. Ahead of the latest round of cuts, the average mortgage loan interest charge, according to data compiled by Jones Lang LaSalle, had already fallen to 4.36 per cent. This week's rate cut is the seventh this year and has taken savings rates down 3.25 per cent from 4.75 per cent on January 5 to the latest figure of 1.5 per cent; and lending rates down by a slower rate of 3 per cent from 9.5 per cent to 6.5 per cent. The BEA was among the banks to issue statements on interest rates yesterday. 'We will be lowering the prime lending rate by 25 basis points to 6.5, and our savings deposit rate by a half per cent to 1.5 per cent,' said Mr Pang, who added that this would take floating mortgage rates to their lowest level ever recorded. 'But I do not know whether that will be enough to trigger a recovery in loan demand.' Similar cuts to the same settings were announced by Standard Chartered Bank, Dao Heng Bank and DBS Kwong On Bank. Bank of China cut both its prime rate and savings rate by 25 basis points to 6.5 per cent and 1.75 per cent respectively. Dao Heng Bank senior general manager Ping Shing Tam said the cut was made to reflect the market situation. 'I believe the comment by Greenspan when he announced the latest cut to the Fed funds rate - that it may be some time before we see things picking up in the US - was important,' said Mr Ping.