Some of Hong Kong's largest commercial banks in the mortgage loans market said they would raise interest rates following the latest round of mortgage tightening measures by the city's de facto central bank. Banks have to set aside more capital when they lend after the Hong Kong Monetary Authority (HKMA) raised the risk-weighted floor by 10 percentage points to 25 percent for new residential mortgage loans last Friday.
The HKMA also restricted the amount of loans some property buyers can get when it lowered the loan to value ratio by 10 percentage points, and trimmed the debt servicing ratio.
Standard Chartered PLC said the new measures raised their business costs. "The new requirement on risk management of new residential mortgage loans has increased the cost of doing business," it said in a statement.
Standard Chartered and HSBC Holdings PLC will both increase the interest rate on their mortgages linked to the Hong Kong interbank offered rates, or HIBOR, by 10 basis points to HIBOR + 1.4 percent, effective Monday. "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.
Bank of China Hong Kong will also raise its HIBOR-linked mortgage interest rate by the same degree to HIBOR + 1.4 percent, and increase interest rate on mortgages linked to the prime rate, effective June 5, the bank said in a statement. "As the property price in Hong Kong is surging, the timely adjustment of mortgage rates could help prudently manage our risk," said Florence Chan, head of secured and retail lending in the bank's personal banking and wealth management department.
"We will keep the mortgage rates and cash rebate under constant review and do not rule out the possibility of further adjustment." Hong Kong has one of the most expensive property markets in the world and private home prices keep breaking records despite the HKMA's eight rounds of mortgage tightening measures since 2009 and the government's tax and regulatory policies.