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SCMP Reporter

DBS Bank (Hong Kong), a local unit of Singapore's largest lender, will  increase mortgage rates for new homebuyers by 20 basis points from Monday. Other lenders are expected to follow the move.
DBS is the first bank to declare a rate increase after recent concern in the industry about the squeeze  on mortgage margins because of higher funding costs.
Major lenders such as HSBC, Hang Seng Bank, Bank of China (Hong Kong) and Bank of East Asia said yesterday their mortgage rates remained unchanged, but they were closely monitoring the market.
The bank will raise its mortgage rate for new homebuyers from 2.5 per cent to 2.7 per cent, or from 3 percentage points below the prime lending rate to 2.8 percentage points  below prime. But the cash rebate of up to 0.5 per cent remained unchanged.
The increase means a new homebuyer borrowing HK$1 million over 20 years will pay HK$98 more each month.
'As the funding cost has risen to about 2.4 per cent, it's hard for us to make any money from the mortgage business if we don't adjust the rate,' said Sunny Cheung Yiu-tong,  head of consumer banking  at DBS Bank.
One-month and three-month interbank rates rose to 2.065 per cent and 2.425 per cent respectively yesterday, from 1.925 per cent and 2.305 per cent at the previous close.
Raymond Or Ching-fai,  the vice-chairman of Hang Seng Bank, said on Thursday that lenders were facing more pressure to raise mortgage rates as interbank rates had surged in the past few days.
Mr Cheung said interbank rates would rise further, as the market  expected global central bankers would increase interest rates to curb inflation. He said banks  could also be under pressure to increase prime lending rates if interbank rates rose further, even if the US interest rate remained unchanged after a meeting later this month.
Lenders have been hesitant to raise mortgage rates for fear of losing their market share.
Peggy Tam Lai-king,  the head of secured loans at Hang Seng Bank, said that she expected the move by DBS to force some lenders to seriously consider raising their mortgage rate.
Kenneth Tsin Wai-lun,  senior mortgage distribution manager  at Bank of East Asia, said some banks might wait to see what major lenders did before raising mortgage rates.



Other banks tipped to follow as  DBS ups new home loan rates