Three months ago, the Monetary Authority warned bankers they were charging unreasonably low mortgage rates and ignoring the risks involved. It seems not everyone is listening. In what could be the opening salvo of a renewed mortgage price war, ICBC (Asia) is offering what is believed to be the lowest ever fixed interest rate on a mortgage. Homebuyers will pay a fixed rate of 1.08 per cent for the first year. After that, the rate will be 3.15 percentage points below the prime rate. With the prime rate now at 5.25 per cent for ICBC (Asia) - it is 5 per cent at some other banks - the interest rate would be 2.1 per cent. The market rate for mortgage loans is 2.25 per cent, according to Kostka Cheung, senior chief vice-president at mReferral Mortgage Brokerage Services, a subsidiary of Midland Realty, Hong Kong's only listed property agent and ICBC's partner in the scheme. 'It's the lowest fixed mortgage rate in Hong Kong,' he said. A homebuyer who opts for the ICBC (Asia) plan would save HK$33,760 in interest on a 25-year mortgage for a HK$3 million flat compared with current mortgage schemes, according to the bank. The offer, which will run until the end of March, is available to buyers of new and secondary homes who take out loans of HK$1 million or more. 'We will see an array of competitive home financing schemes in coming months as a way to compete for more home loan business,' Cheung said. Ivy Wong Mei-fung, managing director of rival company Centaline Mortgage Broker, said her firm would come up with new mortgage offers designed to 'meet the demand of our customers and in line with the market trend'. With limited room for more cuts to mortgage rates, Wong said banks might consider offering other sweeteners, such as waiving the penalty for early redemption of a mortgage. Frankie Wong Kin-shing, chief operating officer at mortgage broker and property consultancy Pan Asian Mortgage, said many home-loan plans offered customers a low interest rate for the first one or two years but banks often charged more later to cover their costs. 'It is just a gimmick to attract market attention and use it as a marketing tool to raise buying interest,' Frankie Wong said. A Monetary Authority spokeswoman said it would not comment on individual banks' decision- making. When the authority issued its warning last year, lenders were charging mortgage interest rates as low as prime minus 3.25 percentage points, or about 2 per cent in real terms. Most banks have raised their mortgage rates since. Mreferral forecasts that the mortgage loan business will grow 19 per cent to HK$238 billion this year, from HK$200 billion in 2009, because of the 'buoyant buying sentiment'. Cheung expects interest rates to go up by a quarter of a percentage point to half a percentage point in the second half of the year because of inflation. Going low ICBC (Asia) offers the lowest fixed interest on a mortgage in the market Repayments per HK$1 million borrowed on a 25-year mortgage with ICBC will be: $4,287