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Warning of higher home loan rates on tightening

Victor Cheung

Friday, March 08, 2013

Several banks have warned that mortgage rates are likely to rise in the medium to long term as regulatory standards are tightened.

The Hong Kong Monetary Authority last month ruled that the lower threshold for risk- weighted assets in newly offered mortgages will be raised to 15 percent from 10 percent.

Benjamin Hung Pi-cheng, chief executive of Standard Chartered Hong Kong, said the policy may raise mortgage costs by 0.2 to 0.25 basis point per loan. The bank is the fourth- largest issuer of home mortgage loans in Hong Kong.

Tighter rules "will surely raise costs of mortgage lending, and I believe home loan rates will be raised in the medium to long term," he said yesterday at the bank's post-result press briefing.

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But Hung stressed StanChart has not yet decided on any adjustments, adding that new moves will depend on the market environment.

His comments came after Iain Mackay, finance director at HSBC Holdings (0005), the second-largest issuer of mortgage loans, told analysts that "the market will perceive repricing over time" due to tightening.

Market watchers said that as the current mortgage rates are extremely low the extra cost will probably be shifted entirely to the customer - meaning the ceiling for local mortgage loans may rise to 2.4 percent from the present 2.15 percent.

BoC Hong Kong (2338), the top issuer of mortgage loans, said it will review its rates based on market conditions and the impact of tightening on capital cost.


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