HSBC and StanChart raise Hong Kong mortgage rates

Increases follow futile government attempts to cool overheated housing market.

HSBC Holdings Plc and Standard Chartered Plc increased mortgage rates for the first time since 2011 after the Hong Kong Monetary Authority issued tougher rules to head off a property bubble that could cause a financial crisis.

Both lenders will raise home loan charges priced at the best lending rate by 25 basis points starting March 13. HSBC mortgages linked to the best rate will climb to a range of 2.85% to 3.15%, from 2.6% to 2.9%.

The last time that Hong Kong banks raised mortgage rates was in 2011 when they boosted home loan charges by six times.

HSBC was second in the city’s home loan market last month with a 17% share while StanChart was fourth with 13%.

Analysts believe Hong Kong banks won’t increase mortgage rates too much as this would cause home prices to fall, which isn’t good for them. They said, however, that Hong Kong banks may increase mortgage rates this year by a total of 50 basis points, in two moves, including the 25 basis point increase on March 13.

In February, HKMA told banks to set the risk weighting for new residential loans at 15% or more, seeking to strengthen buffers after prices doubled to a record in the past four years. Prices may fall by as much as 20% over 24 months as mortgage rates increase and the government moves to cool demand.