Some HSBC Hibor-based mortgages dearer than loans based on prime rate

HSBC will raise its mortgage interest rate based on the Hibor, or Hong Kong interbank offered rate, today - meaning that, for the first time, Hibor-based mortgages may cost more than mortgages based on the prime lending rate.

HSBC will raise its Hibor-based mortgage to Hibor plus 1.8 to 2.3 per cent, from Hibor plus 1.5 to 2 per cent, while lowering its listed price for mortgages based on the prime lending rate to prime minus 2.7 per cent from prime minus 1 to 1.5 per cent.

HSBC's prime lending rate stood at 5 per cent yesterday, while the benchmark one-month Hibor stood at 0.2 per cent. This means mortgage interest rates based on the Hibor will be up to 2.5 per cent from now on, while the listed price for prime-rate mortgages stands at 2.3 per cent.

HSBC's move comes after DBS and CCB Asia increased their rates on Monday. This will be the fourth time HSBC, the leading market player in Hong Kong, has increased its mortgage interest rate based on Hibor this year, the bank said.

'This is the process of mortgage interest rate normalisation in Hong Kong,' said Sharmaine Lau, chief economist at Referral Mortgage Brokerage Services.

While the Hibor has traditionally been the benchmark for Hong Kong dollar wholesale lending, Hibor-pegged mortgages gained popularity in 2008 after the rate dipped in line with falling interest rates. Some mortgages, though, are priced against the prime lending rate, a favoured retail benchmark for products like personal loans and tax loans.