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Major Hong Kong Banks Raise Mortgage Rates

HKMA also restricted the amount of loans some property buyers can get.HKMA also restricted the amount of loans some property buyers can get.

Some of Hong Kong’s largest commercial banks in the mortgage loans market said they would raise interest rates following the latest round of mortgage tightening measures by the city’s de facto central bank.

Banks have to set aside more capital when they lend after the Hong Kong Monetary Authority raised the risk-weighted floor by 10 percentage points to 25% for new residential mortgage loans last Friday, Reuters reported.

The HKMA also restricted the amount of loans some property buyers can get when it lowered the loan to value ratio by 10 percentage points, and trimmed the debt servicing ratio.

Standard Chartered PLC said the new measures raised their business costs. “The new requirement on risk management of new residential mortgage loans has increased the cost of doing business,” it said in a statement.

Standard Chartered and HSBC Holdings PLC will both increase the interest rate on their mortgages linked to the Hong Kong interbank offered rates, or HIBOR, by 10 basis points to HIBOR + 1.4%, effective Monday.

“We will continue to work within the enhancedý regulatory guidelines to ensure that our mortgage lending continues to be prudently managed,” HSBC said in a statement.

Bank of China Hong Kong will also raise its HIBOR-linked mortgage interest rate by the same degree to HIBOR + 1.4%, and increase interest rate on mortgages linked to the prime rate, effective June 5, according to the Hong Kong Economic Journal. Bank of China Hong Kong did not immediately respond to a Reuters request for comment.  

Hong Kong has one of the most expensive property markets in the world and private home prices keep breaking record highs despite the HKMA’s eight rounds of mortgage tightening measures since 2009 and the government’s series of tax and regulatory policies.

Thousands of home buyers formed long queues at the sales offices of some of Hong Kong’s biggest developers to snap up new apartment units that had just been put on the market, ignoring the 10-basis point increase in mortgage rates announced by four of the city’s top lenders.

As many as 4,800 buyers registered to bid for 307 apartment units at K&K Property’s Victoria Skye project at the former airport site of Kai Tak. One buyer, who wasn’t identified, walked away with four units for a total of HK$30 million ($3.85 million), agents said.

“Sales had been impressive,” said Midland Realty’s chief residential executive Sammy Po. “The most recent tightening bodes well for developers as they can use their own mortgage schemes with preferential rates to entice buyers.”

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