Banking & Finance

Hong Kong’s banks raise mortgage rates, after HKMA tightened risk rules

HSBC, Standard Chartered, Bank of China (Hong Kong) and Hang Seng raised their mortgage rates to Hibor plus 1.4 per cent.

PUBLISHED : Friday, 26 May, 2017, 8:30pm
UPDATED : Saturday, 27 May, 2017, 5:53pm

Four of Hong Kong’s biggest commercial banks have raised their mortgage rates, following last week’s move by the city’s monetary authority to tighten borrowing rules and loans limits amid a surging real estate market.

HSBC, Standard Chartered, Bank of China (Hong Kong) and Hang Seng Bank all announced raising their Hibor-linked mortgage rates by 10 basis points to 1.4 per cent above the city’s interbank offered rate, or Hibor. The new rates at HSBC and Standard Chartered take effect on Monday, while Bank of China (Hong Kong) and Hang Seng said their moves are effective June 5.

“We will continue to work within the enhanced‎ regulatory guidelines to ensure that our mortgage lending continues to be prudently managed,” HSBC said in a statement.

Hong Kong homebuilders to face tougher limits on bank borrowing

Hibor linked mortgages in Hong Kong have been stable in recent months, but this now seems set to change.

“An upward trend is expected to come,” said Rachel Lam, managing director at price comparison website Money Hero.

Standard Chartered attributed the rise in its lending rate to recent regulatory changes by the HKMA, Hong Kong’s de facto central bank.

“The new requirement on risk management of new residential mortgage loans has increased the cost of doing business,” the bank said. “To ensure an effective management on risks, we will lift the Hibor-linked mortgage interest rate.”

Last Friday the HKMA introduced new regulations which stated that banks must allocate a larger risk weighting toward their assessment of credit worthiness, while cutting the amount of allowable loans on residential and commercial properties.

Hong Kong tightens screw on borrowers of multiple loans as property market overheats

This was the second round of tightening measures in a week. The previous Friday, the HKMA announced rules restricting lending to property developers.

The tighter restrictions seem to have had little effect on home buyers so far.

On Thursday, thousands of prospective buyers packed a shopping mall to bid for a Tsuen Wan project developed by Cheung Kong Property Holdings.

Massive buyer turnout for Cheung Kong’s Tsuen Wan project

A spokesman for Citibank in Hong Kong said that as of Friday there was no change in its lending rates.

At Bank of China (Hong Kong), the interest rate on its prime rate-linked mortgages will rise from prime minus 2.85 per cent to prime minus 2.75 per cent. The same will apply at Hang Seng, the bank said in a statement.

(This story has been amended to correct the effective date of the mortgage rate increases at Bank of China (Hong Kong) and Hang Seng Bank.)