Hong Kong banks 'killing themselves' in mortgage war

Banks cut home-loan rates in the city by 15 to 40 basis points in May to an average 2.08 percent, data compiled by Hong Kong-based mReferral Mortgage Brokerage Services show. That's the lowest level since records began in 1990, according to mReferral.

“With these kinds of mortgage rates, banks aren't really making much money,” said Dominic Chan, a Hong Kong-based analyst at BNP Paribas Securities Asia Ltd.

The yield on 10-year Treasuries fell to 3.54 percent on June 26 in New York.

Chan has a “buy” rating on BOC Hong Kong Holdings Ltd., Bank of East Asia Ltd. and HSBC Holdings Plc, and a “hold” on Hang Seng Bank Ltd.

The Hang Seng Finance Index, which tracks shares of the city's biggest lenders, fell 17 percent during the past 12 months, matching the benchmark Hang Seng Index's performance. The finance gauge advanced 0.22 percent Monday at 10:31 a.m. local time.

Bank of Communications Co., the Chinese bank 19 percent owned by London-based HSBC, started offering mortgage rates on June 10 priced at as much as 3.25 percentage points below its prime rate, which stands at 5.25 percent. The prime rate is the benchmark banks use to calculate what to charge for mortgages.

HSBC, Hong Kong's biggest bank by branches, began a new mortgage plan in March offering a fixed 2.18 percent interest rate in the first year and a floating rate of 1.75 percent below the prime rate thereafter. BOC Hong Kong, which has the largest share of the mortgage market, announced a similar plan later that month, with rates as low as 2.16 percent the first year.

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