2024-04-23 20:30:18
C｜Why banks no longer offer cash back
Mortgage construction has 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 greater protection to the bank’s interests. In addition, if the borrower is the owner-occupier of the building, he will rarely default easily so as not to affect the fundamental life of his family. For this reason, even in the event of negative equity, the borrower will not stop making payments.
Additionally, Hong Kong lenders accept floating interest rates for interest repayments. When the macroeconomic environment changes, banks have the right to adjust the interest rates charged, which has almost closed the door to this activity. In addition, for this type of installment activity, the repayment period can reach 20 to 30 years. When a bank accepts a business, it can have a long period of profit. Therefore, banks are ready to exert their efforts to win mortgage contracts. To this end, they are willing to offer one-time cash discounts to borrowers to attract customers.
This type of discount can reach 3% of the loan amount when competition between banks is fierce. However, in recent times, banks have reduced the proportion of cash remittances to almost zero. Why has the bank’s attitude changed so radically?
Some pessimists believe that this reflects the fact that banks are no longer optimistic regarding the prospects of Hong Kong real estate and fear that risks will increase further, and therefore do not want to engage in as much construction activity mortgage loans.
This speculation is not unreasonable, but it goes once morest the bank’s valuation policy. Property prices have rebounded slightly since the government completely withdrew stimulus measures. Banks reacted quickly and quickly raised their valuations in line. If the bank really does not want to get into the real estate mortgage business, it can suspend the increase in the value of the mortgage for the time being. This is the most effective measure to scare away customers.
It can be seen that the mortgage business is still a business that banks want to do, but following the mortgage was withdrawn, the volume of real estate transactions increased significantly, and the business received by banks also increased accordingly. According to friends in the banking industry, they received almost one more mortgage application in March than in February, allowing them to meet their first quarter business targets ahead of schedule, so they no longer need to rely on discounts to win business. Doing business is regarding making money, not giving it away. Nowadays there is so much business that we can’t stop doing it, so of course there is no need to solicit more with gifts. As for valuation, it cannot be dissociated from the market. Because if a bank gives the impression that its valuation is not lower than the market, customers will turn to other banks for mortgage loans in the future. The amount of discounts given by the bank is a policy that the bank will change over time. Sometimes clients are already mentally prepared for it. This will not do much harm to the bank’s image.
Judging from the above situation, the fact that banks are no longer giving discounts is a sign that the real estate market is booming and banks are constantly doing business, rather than a sign that banks are not are not optimistic regarding 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 quickly as possible. If you meet the conditions, it is best to find another bank to cover the situation to avoid the bank that initially agreed to lend money temporarily changing its status.
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