(by Ma ChuiMei)
The Government has repeatedly warned that Hong Kong's economy would enter a recession in the second half of the year and the downside risks to the property market are increasing, so Hong Kong Banking should be ready in take action although the mortgage business has always been fiercely competitive. There is a rumor in the market that Hang Seng Bank will decrease the cash rebate of submortgage from the original 1% to zero in the next month, which is rising interest rates in disguise. Some analysts believe, other banks may not fully follow, but possibly would lower the cash rebate of submortgage, because under the situation of mortgage discount does not match the income, banks may decrease the business proportion of further charge cash-out and submortgage in the future and transfer to products having more benefit.
Some banks immediately adjusted the new property mortgages after large banks adjusted the whole line of first and second hand new property mortgages and rebates in the middle of August, but the range was relatively small, also some banks did not follow the adjustment. Market source points out that, Hang Seng Bank will decrease the cash rebate of submortgage from the original 1% to zero in the next month, showing banks are more cautious in submortgage business. The cash rebate is HKD40,000 for a loan amount at HKD4 million referring to the previous submortgage discount, while owner has no incentive to do submortgage in Hang Seng Bank if the cash rebate is decreased to zero.
Hang Seng Bank: Will review from time to time according to the market situation.
Hang Seng Bank spokesman expresses, the mortgage rate and cash rebate will depend on factors such as customer relationships, loan amount etc, and will be reviewed from time to time in response to market conditions. Although it is speculated that Hang Seng's parent bank HSBC is likely to introduce similar measures, but the HSBC spokesman yesterday replied and denied the news of decreasing the cash rebate of the property submortgage to zero, pointing out that the rumors were unfounded. Spokesman of BOCHK responded they would pay close attention to the market development and review the mortgage service conditions from time to time.
The outside world is concerned about whether small and medium-sized banks will follow to introduce similar measures. The Managing Director of Dah Sing Bank, Wong ChoHing yesterday expressed, the property market still fluctuates, while the first-hand property sales remain boom although the second-hand property prices have dropped, so it is still necessary to observe, then decide whether to decline the cash rebate of submortgage according to the property market trend.
The Senior Vice President of mReferral Mortgage Brokerage Services, Cho TakMing believes, banks have adopted a proactive approach to mortgage business and have attracting customers with low interest rates and high rebates, however the recent market sentiment and interest rate adjustment make the banks that use the “Internal Ratings-based Approach” to firstly consider the bank capital adequacy ratio and profitability etc, so no matter mortgage rate hike or cash rebates decreasing is measure to strengthen risk management and make capital use more economical.
Low profit; Strengthen risk management.
Cho TakMing stresses that, mortgage customers have low loyalty and need to be given a substantial cash rebate, also are not easy to be attracted if the mortgage rate is higher than that from peers banks, besides the marginal profit of the bank is low, so it is believed other banks may follow accordingly If large banks largely reduce further charge cash-out and submortgage discount. However, he believes that there still banks offering a small amount of cash rebates, ranging from about 1% to 1.5%, then customers' submortgage intentions will be greatly reduced, for example, the submortgage cases in the fourth quarter was reduced by half to about 4,500 case than that in the same period last year.
The Mortgage Managing Director of Centaline, Wong MeiFung also believed that, the move is only an adjustment of some individual banking strategy. It is expected that other banks may not follow the adjustment to zero, but have the opportunity to follow and decrease the cash rebate to 1-1.5% of the loan amount.
She mentioned that the application for submortgage in the first half of this year was active. The main reason was that the cash rebate provided by banks had been a new high in recent years. This made mortgage customers to get used to apply submortgage after the penalty period to earn a rebate, but it decreases the profit of each mortgage case. She believed that the adjusting of the cash rebate of submortgage to be zero will not be further extended to the first and second-hand new property mortgage, plus there is no mortgage interest hike, so it is expected property market is unaffected.
