In this low interest rate environment, banks are struggling to make money, according to the latest International Monetary Fund (IMF) report.

The IMF also says that the margin squeeze makes it harder for banks to expand lending to business and consumers.

Hong Kong banks are feeling the pinch during the economic slowdown, leading to the sharp decline in private sector investment in Hong Kong and also around the region. Some major banks were reported to have aggressively cut highly-paid staff to save costs.

Meanwhile, major local banks with extensive branch networks are trimming profit margins to fight for market share in the mortgage lending business to take advantage of the real estate boom - the only bright spot in the economic gloom. Some major banks have cut the mortgage loan interest margin to as low as 1.35 percentage points above fund costs to lure home buyers.

This is not doing the economy much good - at least in the short-term. Economic growth for 2016 is widely expected to slow to 1.5 percent, down from last year's 2.3 percent. But a thriving property market is seen as a morale booster, which can help encourage domestic consumption.

The benefit of low mortgage lending rates is not limited to new home buyers. More and more home owners are seeking to refinance their existing mortgages at more favorable terms. Latest government figures show that mortgage refinancing amounted to HK$7.2 billion in August, up 45 percent from a month before and 60 percent from a year earlier.

The rush by home owners to refinance their mortgages is estimated to have intensified in September, and will continue in the following months ahead of the expected interest hike in the United States in December. A reverse in the interest rate trend could help widen banks' profit margins, negating the need to offer special incentives to attract mortgage borrowers.

If you, like many other home owners in Hong Kong, are saddled with a big mortgage loan, now is the time to call your bank.

(HK Edition 10/07/2016 page5)