C’s point of view｜Why banks no longer provide cash rebates
Building mortgages have always been a business that Hong Kong banks are happy to do. The reason is that this type of loan is secured by fixed assets, which gives the bank’s interests greater protection. Furthermore, if the borrower is the owner-occupier of the building, the borrower will rarely default easily, lest it affect the basic life of his family. For this reason, even if negative equity occurs, the borrower will not stop making payments.
In addition, Hong Kong’s lenders accept floating interest rates for interest repayment. When the macroeconomic environment changes, banks have the right to adjust the interest rates charged, which has almost closed the door to this business. Furthermore, for this type of installment business, the repayment period is as long as 20 to 30 years. When a bank accepts a business, it can have a long profit period. Therefore, banks are willing to spend their efforts to win mortgage business. To this end, banks are willing to provide one-time cash rebates to borrowers to attract customers.
This kind of rebate can reach 3% of the loan amount when competition among banks is fierce. However, in recent times, banks have reduced the proportion of cash rebates to almost zero rebates. Why did the bank’s attitude change so drastically?
Some pessimists believe that this reflects that banks are no longer optimistic about the prospects of Hong Kong real estate and are worried that risks are further increasing, so they no longer want to take on so many building mortgage businesses.
This speculation is not unreasonable, but it goes against the bank’s valuation policy. Property prices have rebounded slightly since the government’s complete withdrawal of stimulus measures. Banks responded quickly and quickly raised their online valuations. If the bank really doesn’t want to take on the property mortgage business, it can hold off on raising the mortgage valuation for the time being. This is the most effective measure to drive away customers.
It can be seen that the mortgage business is still a business that banks want to do, but after the withdrawal of the mortgage, the transaction volume of buildings has increased significantly, and the business received by banks has also increased accordingly. According to friends in the banking industry, they received nearly one more mortgage business in March than in February, allowing them to complete their first-quarter business goals ahead of schedule, so they no longer need to rely on rebates to grab business. Doing business is to make money, not to give away money. Now that there is so much business that we can’t stop doing it, of course there is no need to solicit more with gifts. As for valuation, it cannot be divorced from the market. Because if a bank gives people the impression that its valuation is not at a discount to the market, customers will switch to other banks for mortgages in the future. The amount of rebates provided by the bank is a policy that the bank will change from time to time. Customers are already mentally prepared for this. It won’t do much harm to the bank’s image.
Judging from the above situation, the fact that banks no longer provide rebates is a sign that the property market is booming and banks are constantly doing business, rather than a sign that banks are not optimistic about the market outlook. However, in any case, if any of the readers have recently purchased a property but have not completed the transaction, they should arrange their mortgage as soon as possible. If you have the conditions, it is best to find another bank to cover the situation, so as to avoid the bank that originally agreed to lend money temporarily changing its status.
