Sales of Hong Kong flats dropped after two major mortgage lenders decided to raise their interest rates for HIBOR-based mortgage plans.
According to the latest HIBOR-based data, HSBC’s loan rate rose between 1.17 and 1.57 percent, from 1.07 and 1.27 percent, while the Bank of China (HK) has gone between 1.17 and 1.47 percent, from 1.07 percent.
This means that when an interest rate reaches 1.17 percent, those buying a HK$2 million home with a 20-year mortgage plan would need to pay HK$125 per month, from the original monthly payment of about HK$6,376, said mReferral.
Despite the increase, the HIBOR-based mortgage interest rates are still significantly lower compared to prime-based rates, the lowest of which is 2.15 percent.
After the rate increase, deals at the 10 benchmark housing projects dropped to 46 from 52 during the weekend, said Centaline Property Agency.
Even home owners in Taikoo Shing, a traditional benchmark of the Hong Kong Island housing market, allowed their buyers to bargain one to two percent off the price, which has rarely happened during the past few months.
“Home owners have been less aggressive lately as many expected property prices to drop after seeing prolonged increases,” said Kenneth Chiu, Chief District Sales Manager at Centaline in Taikoo Shing.
“They, too, were worried that home prices may be affected by interest rate hikes. Some of them decided not to take the risk and placed a safer bet,” added Mr. Chiu.