Banks are offering fixed-rate second mortgage products to lure homebuyers as interest rates rise. So far two institutions - the Bank of East Asia and DBS Bank - have announced flexible mortgage plans to allow borrowers to 'lock in' part of their interest rates. 'As interest rates have risen one percentage point since March, the fixed-rate mortgage plan will attract borrowers' interest,' said Ivan Lo, deputy chief executive of mortgage broker mReferral. He said the fixed-rate second mortgage product would become another battlefield for banks to compete for customers. Bank of East Asia launched mortgage financing of up to 95 per cent, which included a first mortgage of 70 per cent of the appraised property value and a second mortgage of up to 25 per cent. Fixed rate for the second mortgage of two years is 2.98 per cent a year. The annual rates offered on terms of three or five years are 3.38 per cent and 3.98 per cent, respectively. The product is offered in conjunction with the Hong Kong Mortgage Corp. For the second mortgage, borrowers can choose a floating rate as low as prime minus 2.4 per cent a year. DBS Bank has introduced a similar 95 per cent mortgage scheme that includes a 70 per cent mortgage at a rate as low as 2.55 percentage points below prime, now offered by the bank at 6 per cent. For the remaining 25 per cent second mortgage, borrowers can choose a fixed rate of 2.98 per cent on a term of two years or a floating rate of 2.4 percentage points below prime. The Hong Kong Monetary Authority has advocated the introduction of a wider array of fixed-rate mortgage products for Hong Kong since the late 1990s. But borrowers were not inclined to adopt them as interest rates fell after 2001. However, a fixed-rate mortgage might be of more interest now that an increase in Hong Kong interest rates is forcing borrowers to pay more to service their mortgages. Hendrick Leung Lee-chung, director and general manager of Centaline Finance, said the fixed-rate plans covered only a second mortgage and would not substantially reduce the borrowing cost but they might ease some nervous buyers' concerns. The 2.98 per cent two-year fixed-rate plan was attractive as it was cheaper than the floating rate, Mr Leung said The three-year and five-year fixed rates offered by Bank of East Asia were higher than the current floating rate but might tempt borrowers who thought rates would rise. Developers are also considering flexible mortgage offerings. Cheung Kong (Holdings) has offered buyers of Laguna Verde units a mortgage rate as low as 6.25 percentage points below prime. Buyers can reap interest income in the first year. The mortgage rate for the rest of the repayment period is 2.6 percentage points below prime.