HSBC's latest rise shows mortgage rates may be normalising

With HSBC planning to raise mortgage interest rates for the fifth time this year, charges for home loans appear to be returning to their historic levels, analysts say.

Other banks may follow HSBC's lead, said Sharmaine Lau Yuen-yuen, chief economist at mReferral Mortgage Brokerage Services.

HSBC will raise its mortgage rate based on the Hibor, or Hong Kong interbank offered rate, on Monday to Hibor plus 2.3 per cent to 2.7 per cent from Hibor plus 1.8 to 2.3 per cent. It will lift its listed price for mortgages based on the prime lending rate to prime minus 2.1 per cent to 2.4 per cent from prime minus 2.7 per cent.

The Hibor is the traditional 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 personal and tax loans.

The benchmark one-month Hibor stood at 0.2 per cent yesterday, while HSBC's prime lending rate stood at 5 per cent. This means mortgage interest rates based on the Hibor could be as high as 2.9 per cent. The upper end of prime-rate-based mortgages could also reach 2.9 per cent. The average prime-rate-based mortgage rate should be about 2.5 per cent for quality customers, Lau said.

'The rise in mortgage prices may be nearly at an end,? said Lau. More homeowners were returning to prime-rate-based loans as Hibor mortgages became more expensive.