Average mortgage rates in Hong Kong are expected to rise by as much as four percent this year, from the current 2.38 percent, said Sharmaine Lau, Chief Economist at mReferral Mortgage Brokerage Services.
“Hong Kong banks are very reluctant about raising mortgage rates further because of what it may do to transactions,” said Lau. “But at the same time they’re facing a steep increase in funding costs.”
A Hong Kong-based analyst at Barclays said the increase “should weigh on transaction volume and suggests we will see a slightly faster fall in prices.”
Meanwhile, government insured mortgages plunged to its lowest level in six years in 2011, a sign that the biggest drop in home prices since the global financial crisis is accelerating.
In Hong Kong, extra transaction taxes, higher downpayment on mortgages and rising borrowing costs fuelled the decline.
“We’re in for a very challenging first half,” said Wong Leung-sing, Associate Director of Research at Centaline Property Agency Ltd, the city’s largest realtor.
“The drop in secondary mortgages means buyers are having trouble borrowing from the banks the full amounts they need. The ones that are taking the biggest hits right now are the middle- to lower- priced housing segment.”
Loans covered by the Hong Kong Mortgage Corp’s (HKMC) insurance programme fell 36 percent to HK$26 billion (S$4.2 billion) last year, the biggest decline since 2006.
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