A new round of mortgage rate increases has come after the Hong Kong Monetary Authority (HKMA) released a circular which requires lenders to be cautious of rapid credit growth.
The Bank of East Asia, the fifth largest mortgage lender by market share, has taken the lead. It has revised its loan offer to HIBOR plus 1.3 percent, from a range of HIBOR plus 0.9 to 1.3 percent.
The bank also closed cash rebates for new applications.
With the one-month Hong Kong interbank offering at a 0.2 percent rate, HIBOR plus 1.3 percent would effectively mean a 1.5 percent rate.
Based on the previous rate of HIBOR plus 0.9 percent, a property buyer of a HK$2 million home, after a 30 percent down payment for a 20-year loan, would have to pay HK$6,501 per month.
But with the new rate, another HK$254 will be added to the buyer’s monthly payment.
The revisions came after a letter sent by HKMA Chief Executive Norman Chan Tak-lam to the lenders, stating that loan growth has been too fast and could hurt the quality of bank assets.
“The HKMA has remained vigilant to the risk that a credit-fueled property bubble may pose to banking and financial stability in Hong Kong,” Mr. Chan wrote.
The revision has been expected as lenders have been reducing loans.
“We can see banks increasing their mortgage rates several times over the next couple of months,” according to Andy Kwan Cheuk-chiu, a Chinese University professor.
“And they have been cutting mortgage loans without explicitly lowering the interest rates, such as lowering valuations, or imposing tougher reviews of applicants.”
There were at least 10 banks, including HSBC and Bank of China (Hong Kong), which had revised mortgage loan offers to HIBOR plus 1.3 from 0.9 percent in March, compared to HIBOR plus 0.8 to one percent in February.