The interior of the HSBC building in Central, Hong Kong. The lender raised rates on mortgage loans for the second time in a month. Other local banks have also followed suit. Paul Hilton / Bloomberg

HKAB expects global trend to continue

Two more banks raised their mortgage lending rates Friday as the Hong Kong Association of Banks (HKAB) warned that the expected rise in global borrowing rates will cause liquidity to shrink.

The HKAB added that city banks will feel increased pressure to raise mortgage interest rates, making it more expensive to buy a home.

The comments came after the Hong Kong Monetary Authority (HKMA) warned on Monday of financial risks associated with a potential property bubble.

Meanwhile, Standard Chartered Bank (Hong Kong) and Bank of China (Hong Kong) (BOCHK) both announced on Friday that they will raise their mortgage loan rates by 0.1 to 0.3 percent to "HIBOR plus 1 to 1.5 percent" on April 19 and April 18 respectively.

HSBC, the local largest mortgage loan provider, raised the mortgage interest rate for the second time in a month on Thursday. It raised rates 0.1 to 0.2 percent to "HIBOR plus 1 to 1.5 percent". DBS (Hong Kong) also hiked its mortgage loan rates by 0.2 percent to "HIBOR plus 1.1 to 1.5 percent" Friday.

Other local banks including Bank of East Asia, Wing Lung Bank and ICBC (Asia) also followed suit this week. Wing Lung raised its rate by 0.25 to 0.5 percent to "HIBOR plus 1.25 to 1.5 percent" - the highest mortgage loan rate level in the city at the current time.

In a circular to local banks Monday, the HKMA asked banks to submit their business plans and funding strategies as it expressed concern about a credit-fuelled property bubble in a city where mortgage loans have skyrocketed 19 percent to HK$258 billion in 2010.

"Corporate lending rates will also rise in the near future due to the possible shrinking of market liquidity," HKAB Chairman He Guangbei, also vice-chairman and chief executive of BOCHK, said after the HKAB meeting on Friday.

He added that total lending in the city in 2011 will not grow as robustly as it did in 2010. In 2010, total loans grew by 29 percent to HK$940 billion, fuelled by strong credit demand from property buyers and mainland companies, according to the HKMA.

However, property agents told China Daily that the hike in mortgage rates was unlikely to lead to a drastic drop in property sales - or on prices.

"The increase in HIBOR-related mortgage rates may weigh on market sentiment as this may inflict costs on property buyers, but overall property transaction volumes and prices will not be hugely affected," said Centaline Property Agency Managing Director Louis Chan.

China Daily

(HK Edition 04/16/2011 page2)