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HSBC DRIVES UP COST OF GETTING MORTGAGE (China)

Posted by Gilmour Poincaree on December 3, 2008

Tuesday, December 02, 2008

by Alfred Liu

PUBLISHED BY ‘THE STANDARD’ (Hong Kong – China)

Hongkong and Shanghai Banking Corp has announced it will raise mortgage rates drastically for new home buyers by 50 to 75 basis points.

New customers who take out a HK$1 million home loan will pay HK$5,000 to HK$7,500 more per year in interest as a result.

HSBC raised its mortgage rate, regardless of loan size, to between prime minus 1 percent and prime minus 1.5 percent – equivalent to 3.5 percent and 4 percent, on a new mortgage – with effect from yesterday.

The plan includes a cash rebate of 0.5 percent.

It has now cleared its original dividing range of HK$1.5 million loans and unified mortgage rates for loans of all sizes. The rate increase follows the same move by its peers, the bank said.

“Hongkong Bank may want to maintain its profitability at a reasonable level,” said Industrial and Commercial Bank of China (Asia) (0349) executive director Stanley Wong Yuen-fai.

“The net interest margin for the whole banking mortgage market is 2 percent now. Banks even had to pay interest rate differences when interbank lending rates were very high previously.”

The rate hike is expected to hit improved property market sentiment.

“I predict the transaction volume of secondary residential units will decrease 10 to 20 percent in December compared with November,” said Ricacorp Properties head of research Patrick Chow Moon-kit.

Hong Kong Property chief executive Fredy Wu Yat-fat said the impact would be limited as flat prices have been falling and he expects the move to accelerate home purchases before other banks raise their mortgage rates.

Property market sentiment improved after Sun Hung Kai Properties (0016) sold about 580 apartments at its two new projects, Peak One and La Grove, which were launched on Friday.

Major mortgage players, including Bank of China (Hong Kong) (2388), Hang Seng Bank (0011) and Standard Chartered Bank (Hong Kong), said they have no plans to increase mortgage rates.

Top player HSBC increased its share of the local mortgage market to 26.1 percent as of the end of October, up from 22.4 percent at the end of September, according to mortgage brokerage mReferral.

The brokerage’s chief economic analyst, Sharmaine Lau Yuen-yuen, said she sees the mortgage rate hike as a strategy and predicts more lenders may follow.

“I expect mortgage rates to fall to a level of prime minus 0 early next year,” she said.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘THE STANDARD’ (Hong Kong – China)

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One Response to “HSBC DRIVES UP COST OF GETTING MORTGAGE (China)”

  1. goldelyonn said

    Well, it’s about time! It has been easy money for borrowers for years and HSBC is just one of the global banks cashing in on the real estate boom, probably forgetting what happened in Asia in 1997.
    Let the Americans eat the dust this time—- greed has a way of dumping you after years of exuberance!

    Goldelyonn

    http://www.goldelyonn.wordpress.com

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