HONG KONG – HSBC Holdings, the dominant lender in Hong Kong, is set to raise mortgage rates for borrowers in the Chinese territory, adding pressure on the city’s slumping property market.
The lender is raising the cap on home loans linked to the Hong Kong interbank offered rate (Hibor) by 0.5 percentage point, pushing rates on new loans to 4.125 per cent from 3.625 per cent effective Sept 18, according to two people familiar with the move. Banks last raised the cap in 2022 by 25 basis points.
Hong Kong’s rates have surged because its monetary policy is tied to the United States, weighing on the economy. The city’s property market has struggled as homebuyers are deterred by rising rates. Developers saw the lowest sales since 2019 for new residential units completed in the first six months of 2023, according to real estate agency JLL.
An HSBC spokesman said the bank reviews its mortgage rates regularly and makes adjustments based on prevailing market conditions.
“We have decided to revise our mortgage rate following a recent review, which takes into account a range of factors, including Hibor, our competitiveness and market pricing,” the spokesman said in a statement.
Hong Kong property stocks suffered their biggest sell-off in seven months on Monday, hit by disappointing earnings at the city’s top builder and the plan to raise mortgage rates. The Hang Seng Index’s property sub-gauge dropped as much as 4.5 per cent, the most since Feb 13.
Almost 95 per cent of mortgages in Hong Kong are tied to Hibor, according to July data for new loans by the Hong Kong Monetary Authority. This is likely one of the highest in the world.
The move means that for a mortgage of HK$5 million (S$867,000) with a repayment period of 30 years, a buyer will have to pay HK$1,429 more a month, according to Mr Eric Tso, chief vice-president of mReferral Mortgage Brokerage Services.
“Interest rates and Hibor will continue to remain high for some time, so this is an appropriate and conducive decision for banks to take in order to maintain their profit margins,” he said, adding that other banks may also adjust their mortgage rates or related perks. BLOOMBERG
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