In the latest move in a highly competitive battle for market share, Bank of China has cut its Hong Kong prime lending rate by 25 basis points to 8.0%. Bank of China's new prime rate is the same as HSBC and Hang Seng Bank. Most other lenders have kept their prime lending rates at 8.25%. Mortgage loans are now generally available at prime - 2.9% or prime - 3.0% resulting in effective interest rates of 5.0% or 5.1%.
Older mortgages priced at a smaller discount to the prime lending rate will still benefit from the reduction (including us - we have one mortgage loan with Bank of China).
At the same time, this week has seen a noticable decline in HIBOR rates. When my two HIBOR linked mortgages next roll over in September and October, the combined effect of the lower HIBOR rates and the switch from 3 month fixing to 1 month fixing will cut my funding costs on these loans by about 0.6%.
This has to be positive for the Hong Kong property market.