Hong Kong home price seen falling by 5 per cent after 7 major lenders including HSBC, Standard Chartered set to increase mortgage rates

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Hong Kong home prices are set to fall by about 5 per cent by the end of this year, analysts say, after seven major lenders, including the three note-issuing banks – HSBC, Standard Chartered Bank, and Bank of China (Hong Kong) – said they will raise their mortgage rates as early as Monday.

The trio, together with Hang Seng Bank and Bank of East Asia from will increase mortgage rates for new loan applications by 50 basis points on Monday, while Citibank will make a similar increase on Wednesday (September 20), the lenders’ spokesmen said in a reply to the Post’s inquiries.

The effective mortgage rate for new loans by these six lenders, which control 80 per cent of the mortgage market, will be increased from 3.625 per cent to 4.125 per cent. Existing home loans will not be affected.

The payment on a typical HK$5 million (US$643,000) mortgage over 30 years will increase by 6 per cent after the mortgage rate increases, or by HK$1,430 per month to HK$24,232, according to calculations made by mortgage broker mReferral.

China Construction Bank (Asia) went even further in increasing its mortgage rates for new loans. It plans a 1.5 percentage point rise starting Monday, from 3.625 per cent to 5.125 per cent, according to mReferral which was citing market sources. The Post’s calls to the lender, which has a 0.3 per cent share in Hong Kong’s mortgage market, went unanswered.

Pedestrians walk past a HSBC branch at Pedder Street, Central. Photo Yik Yeung-man

“The mortgage rate rise is going to further hit the already weak property market in Hong Kong. High borrowing costs will discourage people from buying new homes at the moment,” said Louis Chan Wing-kit, CEO of the residential division at Centaline Property Agency.


“The increase in mortgage rates will lead home prices further down by 3 to 5 per cent in the next few months.”

Hong Kong home prices see biggest plunge of the year in July, hit 6-month low

Hong Kong’s lived-in home prices declined for a third straight month in July to a six-month low, as the city’s property market continued to struggle in an elevated interest-rate environment. Prices fell 1.1 per cent month on month in July, the biggest drop this year, according to an index compiled by the Rating and Valuation Department.

The total number of property transactions – including new and second-hand homes, commercial buildings and car parks – dropped for a fourth consecutive month in July, declining 7.6 per cent from June to 4,777, according to a report released by property agency Midland Realty last month. That is the lowest figure in seven months.

“It is highly likely the home prices will decrease over 3 per cent in the following months, offsetting all gains this year,” said Sammy Po Siu-ming, CEO of Midland Realty’s residential division for Hong Kong and Macau. “The home price this year will be flat this year when compared with a year earlier.”


A prolonged high-interest rate environment, slow income growth in Hong Kong and falling property prices in mainland China are likely to keep affordability pressures beyond this year, Goldman Sachs (Asia) analysts Gurpreet Singh Sahi, Wing Huang and Simon Cheung wrote in a report on Friday.

“The latest raise would pressure affordability further,” the Goldman Sachs analysts said. “Hence, we reverse our call for a price improvement in the residential market this year to a flat outcome versus an increase of 5 per cent outlook before.”


Goldman Sachs also expects home prices to remain flat in the following two years and to increase only in 2026 by 4 per cent.

The plans by major lenders to increase mortgage rates comes ahead of the US Federal Reserve meeting later in the week, where analysts widely expected a pause in its rate rising campaign, given the rosier inflation picture.

The Hong Kong Monetary Authority in July raised the city’s base rate, lifting it for the 11th time in the past 17 months by a total of 5.25 percentage points, in lockstep with the Federal Reserve. Hong Kong’s monetary policy follows that of the United States, as the city’s currency has been pegged to the US dollar since 1983.


Commercial banks raised their prime rate five times since September last year by a total of 0.875 percentage points. BOCHK, HSBC Holdings, and its subsidiary Hang Seng Bank now have their prime rates at 5.875 per cent, while those at Standard Chartered Bank, Bank of East Asia, Citibank, and CCB Asia are at 6.125 per cent. These levels were last seen in December 2007.

“Hong Kong lenders may still increase the prime rate this week as the interbank rate is high,” said Eric Tso Tak-ming, chief vice-president at mReferral. “The US may also further increase the interest rate in November,” he added, reflecting the market expectations that authorities will keep at least one rate hike on the table.

The one-month Hong Kong interbank offered rate (Hibor), the benchmark for mortgages, rose to 5 per cent on Friday, compared with 4.7 per cent last month and 4.2 per cent at the beginning of this year, according to Hong Kong Association of Banks.


The three-month Hibor, which is linked to corporate loans, stood at 5 per cent on Friday, while the six-month Hibor reached 5.18 per cent, and the 12-month Hibor advanced to 5.4 per cent on Friday. All three benchmarks are 50 basis points higher than three months ago.

“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,” a spokesman of HSBC said.


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