HSBC Holdings Plc (LON:HSBA), the leading lender in Hong Kong, is preparing to raise its mortgage rates by a maximum of 50 basis points, as it aims to maintain its profit margin in the face of rising interest rates. The new mortgage loans linked to the Hong Kong Interbank Offered Rate (HIBOR) will be increased to as high as 4.125% from 3.625%, effective from Monday next week, according to an HSBC spokesperson.
This decision follows a recent review by the bank considering various factors, including HIBOR, competitiveness, and market pricing. The spokesperson stated, "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 move comes at a time when interest rates in Hong Kong have been surging due to its monetary policy being tied to the US. This has put pressure on the city's economy and caused a slump in the property market. Developers have reported the lowest sales since 2019 for new residential units completed in the first half of this year.
The decision by HSBC is likely to add further pressure on the city's property market. According to Eric Tso, chief vice president of mReferral Mortgage Brokerage Services, this means that for a mortgage of HK$5 million ($640,000) with a repayment period of 30 years, a buyer will have to pay HK$1,429 more per month. Tso added that "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."
The news led to the largest selloff in Hong Kong property stocks in seven months. The Hang Seng Index's property sub-gauge dropped as much as 4.5%, marking the most significant decrease since February 13 this year. Almost 95% of mortgages in Hong Kong are tied to HIBOR, likely one of the highest ratios worldwide, according to July data for new loans by the Hong Kong Monetary Authority.
HSBC and other Hong Kong banks last raised mortgage rates by 25 basis points in December, following a rate hike from Hong Kong's central bank after the US Federal Reserve.
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