Mortgage Rebates Ignite Hong Kong Housing Market Amid Rate Cuts

Shifting Market Dynamics in Hong Kong

Major commercial banks in Hong Kong are starting to offer cash rebates on mortgage financing packages, igniting competition for homebuyers in anticipation of a pickup in transactions as the Federal Reserve prepares to cut interest rates. Some lenders are offering 0.1% to 0.25% discount to prospective borrowers, depending on the loan amount and their creditworthiness, according to Centaline Mortgage Broker. Bank of China (Hong Kong) and Standard Chartered are among them, local media reports showed.

If Banks Are Positive, Why Are Cash Rebates Rising?

“Raising the rebates to attract homebuyers reflects the positive attitude of banks on the property market outlook,” managing director Ivy Wong Mei-fung said. “Other banks are likely to follow suit.” Lenders have been cautious in writing new home loans as the Covid-19 pandemic hit households. The city’s market-boosting measures in February, the biggest in decades, have since worn off as prices weakened.

The Federal Influence

The imminent rate-cut has spurred banks to shed their cautious stance and normalize the approval process on mortgage applications, she added. “The market expects the Fed to announce a rate cut later this month,” said Eric Tso Tak-ming, chief vice-president of mortgage broker mReferral in Hong Kong. “Hong Kong’s Hibor rates could follow suit, which will ease the pressure on banks’ mortgage funding costs.”

Market Expectations

Global markets were encouraged last month when Fed chair Jerome Powell signalled that U.S. policymakers were ready to trim borrowing costs, the first easing move since the current policy tightening cycle began in March 2022. Rate traders have priced in a full percentage point cut in the U.S. by the end of this year, according to odds compiled by CME Group.

Potential Changes in Mortgage Strategies

Commercial banks in Hong Kong could change their mortgage business strategies to reflect the new-found optimism, Tso added. This can strengthen buyers’ confidence to return to the property market, taking cues from some transactions in the office market.

Projected Short-Lived Excitement

While banks in Hong Kong may speed up loan vetting and approvals, they may hold off cutting their prime rates, or the rates they charge their best customers.

Joseph Tsang, chairman of JLL Hong Kong stated, “There will be some excitement from the market, but it’s going to be short-lived.” Property developers have already rushed to entice homebuyers. A total of 87 deals were recorded across 50 major housing estates in Hong Kong last week, the highest in 12 weeks, according to Ricacorp Research.

Final Market Influences

Six of the biggest banks, with a combined 80-percent share of the city’s mortgages, last month pledged to approve all eligible applications by small businesses and mortgage borrowers within two weeks. They are HSBC, Standard Chartered, Bank of China (Hong Kong), Bank of East Asia, Hang Seng Bank, and ICBC Asia.