Hong Kong’s largest bank has rolled out a fixed-rate mortgage plan, charging lower interest for home loan borrowers ahead of the first relaxation in monetary policy this year, expected in mid-September.
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HSBC launched a mortgage plan fixed at 2.73 per cent per annum on Monday for either the first three or five years, according to a release. The rate is cheaper than HSBC’s February offer, which came with options of either 3.18 per cent interest for the first three years, or 3.04 per cent for the first five years.
The cheaper rate came after the Federal Reserve’s chairman, Jerome Powell, sent dovish signals about a possible cut in interest rates during the US central bank’s annual retreat at Jackson Hole over the weekend. The capital markets are now betting on an 87.2 per cent probability of a cut when the Fed meets on September 18, according to the futures contracts traded on the Chicago Mercantile Exchange.
HSBC’s latest offer is also cheaper than Hong Kong Mortgage Corporation’s 10-year fixed rate loan at 4.24 per cent per annum. The new product aims to offer a stable and low repayment for borrowers, said Sydney Massunaga, HSBC’s head of assets and liabilities, wealth and personal banking.
“Our fixed-rate mortgage plans are designed to offer predictability and assurance by locking in monthly mortgage payments, even in a highly volatile interest rate environment,” he said in a statement. “Family budgeting can be challenging, especially when it involves a mortgage liability, the monthly repayment of which will fluctuate with interest rate movements.”
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The fixed rate came as Hong Kong’s interbank offer rates (Hibor) had been driven up by the local monetary authority’s defence of the city’s dollar peg, which drained liquidity from the financial system and drove up the cost of funds. That would mark the end of the so-called “low-rate honeymoon” for borrowers whose loans were based on the Hibor, said Eric Tso Tak-ming, chief vice-president of mortgage broker mReferral.