The average cost of money raised by Hong Kong banks to make loans to their customers edged down by 0.04 percentage point to 2.84 per cent at the end of last month. At the same time banks were charging a prime lending rate of between 7.5 per cent and 7.75 per cent - giving them a gross profit margin on their prime lending business of between 4.91 per cent and 5.16 per cent. Data on the average cost of funds or the 'composite rate', is calculated by the Hong Kong Monetary Authority, which yesterday began releasing the rate on a monthly, rather than a quarterly basis in response to complaints from lenders who wanted the data to be released more frequently. The authority has encouraged banks to drop the system of pricing home loans off their prime lending rates and to use the composite rate instead because it says the rate provides a clearer and more transparent picture of the true cost of funds. Banks, however, have said they want to stick with the practice of pricing mortgage loans off prime lending rates because their customers are familiar with this system and will be confused if they change. They also say the true cost of funds may vary from one bank to another. The composite rate - which takes into account the full range of funding costs, including the interest rates paid by banks to depositors and the interbank lending rate paid to raise funds on the wholesale money market - was 2.88 per cent at the end of December, up just over half a percentage point from 2.33 per cent in September. Meanwhile, the mortgage price war triggered this week when Hong Kong's biggest lender, HSBC, cut the rate on its home loans by a half percentage point to 5 per cent, has intensified. Wing Hang Bank yesterday cut its mortgage rate to 2.75 per cent below its prime rate or an effective rate of 5.25 per cent - and offered a cash rebate of up to 0.25 per cent of the loan amount. Fubon Bank yesterday also jumped into the fray by launching two new mortgage plans, one offering home loans at prime minus 2.6 per cent with a cash rebate of 0.5 per cent. Although many larger lenders such as Hang Seng Bank, Bank of China (Hong Kong) and Standard Chartered Bank have so far not joined the price war, analysts said it was only a matter of time before they did so to defend their business.