The Hong Kong Monetary Authority has issued its second warning to bankers in three months, seeking to head off a possible mortgage war that could hurt net interest margins. Nelson Man, the authority's executive director for banking supervision, said offering low-interest-rate mortgages would put pressure on banks' existing mortgage portfolios as customers sought to refinance. His comment came a day after ICBC (Asia) offered the city's cheapest-ever fixed-interest mortgage rate. In new guidelines on the authority's website yesterday, Man said some lenders had launched new mortgage products with attractive terms, including a trend towards increasing cash rebates. They should ensure that their mortgage rates were sustainable on a long-term basis and provide a reasonable margin after taking into account possible loan losses and operational and administration costs, he said. On Thursday, ICBC (Asia) released a mortgage product charging 1.08 per cent for the first year. After the first year, the rate rises to 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, compared with the market rate of 2.25 per cent. The offer is available to buyers in both the new and second-hand market, and will last until the end of March. An ICBC (Asia) spokeswoman said the mortgage plan took into account risk factors, interest rate movement and market demand, but added that the bank would heed HKMA's reminder. She said the bank had received 'lots of enquiries' about the offer, showing that there was real demand in the market.