ICBC (Asia) gave assurances that banks are not driving mortgage rates down because of heavy industry competition.
Stanley Wong Yuen-Fai, the director and deputy general manager, said that all banks agreed to have the same mortgage rates and rejected claims that banks have reduced their mortgage rates.
"Most banks had adopted prime rate (5.25 percent) minus 3 percent by the end of last year," he said. "It’s not true to say they cut prices further in 2010."
Mr. Wong explained that banks are eager to make mortgage loans since the average risk in the property cycle is low, thus their capital returns are higher compared to other loans. He added that the competition was not deepened, as there was a time in 2009 when the mortgage rate was as low as prime minus 3.2 percent.
After the Monetary Authority warned that several aggressive mortgage plans may incur some loss, lenders soon increased their rates. Mr. Wong said that both the global and US economies are now recovering from the financial crisis, and when the US increases its rates in the second half of the year, there will be no room to decrease the mortgage rates in the city.
He expects that HK Interbank will increase mortgage rates accordingly. He added that there are still considerable differences between the common 2.25 percent mortgage rates and the 0.5 percent three-month Hong Kong Interbank Offer Rate (HIBOR), so banks may be able to adjust the risks as long as the increase is not too big.