Homeowners beware: Citibank first to raise mortgage rate in Hong Kong
The move could encourage other lenders to follow suit, bringing an end to 12 years of cheap home financing in the city, observers say
Citibank will raise its mortgage rate for new borrowers in Hong Kong, making it the first major bank to bring the curtain down on more than a decade of cheap funding to buy property.
The American lender has increased the interest rate on its home loans by 10 basis points, equivalent to an extra HK$50 a month for every HK$1 million of mortgage. For an average mortgage size in Hong Kong of HK$4 million, the increase means new homeowners will pay about HK$200 per month more on a 30-year loan.
“Citibank periodically reviews and adjusts its mortgage rates to reflect the current market situation. The rate adjustment announced today is due to the need to balance the rising cost of funds and is in line with the bank’s risk management policy,” a spokeswoman for Citibank said.
Other banks have not altered their mortgage rates immediately, but Citibank’s move may encourage them to follow suit, ending 12 years of cheap home loans. Many bankers believe that could happen as soon as next month.
Citibank’s higher rate applies to both types of mortgage plan it offers, one linked to the prime rate and one linked to Hong Kong’s Interbank Offered Rate, known as Hibor.