HONG KONG: HSBC Holdings Plc, the second-biggest home lender in Hong Kong, said the decline in mortgage rates in the city probably is over as banks seek to protect their margins.
Lower mortgage rates are “good for the public, not so good for the banks in terms of profitability,” Michael Smith, HSBC’s Asia Pacific head, said in an interview. “HSBC is fortunate in terms of its deposit base. However, that does not mean we like our margins squeezed. You can only go so far.”
Hong Kong banks including London-based HSBC and Bank of East Asia have cut mortgage rates to compete for home loans as 14 straight quarters of economic growth bolster incomes and house prices. Standard Chartered Plc last week said the price war has squeezed lending margins.
Banks with ample deposits to fund lending can charge lower interest rates than those needing to borrow from counterparts at the interbank offer rate. The one-year Hong Kong interbank offer rate was 4.388% on 6 March, higher than the 4.375 % paid on one-year deposits.
New mortgage applications in January increased 18% from a year earlier, according to the Hong Kong Monetary Authority. Falling loan rates have “commoditized” the Hong Kong mortgage market, leading to “very narrow margins,” Julian Fong, chief financial officer at Standard Chartered’s division in the city, said.
HSBC, Hong Kong’s second-biggest mortgage lender according to property agency Jones Lang LaSalle Inc., on 22 February trimmed its mortgage rate to 4.87% from 5 % for borrowers seeking at least HK$500,000 (Rs28,49,637). Bank of China (Hong Kong) Ltd., the biggest maker of home loans, and Bank of East Asia also cut their home loan rates.
Standard Chartered offered loans at 3.8% interest in the first year for borrowers seeking at least HK$3 million, the bank said last week.
“I don’t think there’s much further to go” in terms of cutting mortgage rates, HSBC’s Smith said. “Some of the rates out there are incredibly competitive. You ought to get one, if you haven’t already.”