Banks In Hongkong increasing Mortgage Rate

Top banks in Hong Kong are now raising their mortgage rates and this, in turn, is posing pressure on borrowers. Impact of this hike can be observed in terms of the slowdown in the most expensive and desirable property markets around the world.


Hang Seng Bank, Bank of China and HSBC Holdings recently said that the new mortgage rates would be implemented from coming Monday and the standard chartered announced the same move for Tuesday. Note that, generally mortgages in Hong Kong are either related to prime rate and interbank offered rate of Hong Kong.

The central bank of Hong Kong is now ready to raise the base rates two times as compared to the US Federal Reserve; however, the major banks of the city are still working on the old rates that they were set in the year 2008, at the time of global financial crises.


As per the report presented by the Hong Kong Monetary Authority, by the end of the June month, people in the Hong Kong city had around HK$1.258 trillion bank loans with banks. The delinquency ratio of these mortgages remained unaltered by 0.02% by this month.


The prices of private homes in Hong Kong are observed to be at a record-breaking rate when compared to the last 19 months. This state is causing discontent among financial hub residents. Experts reveal that prices have come down by 3 times since 2008 and they are influenced by low-interest rates, shortage of supply and large money flows from various Chinese investors.


As per UBS, a skilled service worker at present need to work for almost 20 years to be able to buy a 650 square foot flat near the city center. For the local governments as well, reining is currently the top priority in the hot property market. However, prices are still rising day by day since 2016 without getting affected by the tightening measures. The sky-high property valuations of Hong Kong city are also posing a considerable risk on US interest rates.

Bank of China, HSBC, and Hang Seng Bank revealed that they are going to raise the mortgage rate by 10 basis points to the prime minus of 2.75% and this rate will be effective from August 13. They also said that the cap for Hibor Linked mortgages would be raised up to the best lending rates minus 2.65%. Note that Hibor is trending in the market for past 12 months.


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