Choosing a fixed interest rate mortgage plan with care

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The U.S. Federal Reserve is expected to increase interest rates two to three times this year, with Hong Kong following suit to make adjustments as well. Many local banks have launched different fixed interest rate mortgage plans to combat the interest rate hikes, and they are facing keen competition. 

The interest rate increase will most likely start in March, and while it has not been confirmed that Hong Kong will follow the U.S.’s every step, if the U.S. interest rates do spike two to three times, there is no doubt Hong Kong will have to adjust accordingly. Meanwhile, competition is fierce between local banks that offer varying fixed mortgage plans, with major banks throwing their hats in the ring to gain from the mortgage business. The terms and advantages offered by each bank are different, such as penalty periods, charges after the fixed rate period and VIP client terms. Consumers should be cautious before applying and selecting a suitable plan that is also viable to sustain.

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Compared to the H Plan, consumers actually pay 0.5% less with a fixed interest plan. For those who fear interest rates will inevitably hike at the mid-year mark, a fixed interest would lock the lower interest rate, so owners and potential buyers can pay their instalments steadily without the looming worry of an interest rate hike. In addition, following the first year of fixed interest rates, the new H+1.3% interest thereafter costs approximately H Plan’s current interest rate, with the cash refund capped at 1.7% of the property price, which is very attractive for both new buyers and those who are seeking to change mortgage plans.

According to Meridian Mortgage Referral’s research department, there has been a significant increase in enquiries and applications since last September. In January, applications for fixed interest rate plans have inflated by 35% compared to last December, and it is predicted that by 2018’s second quarter the percentage of actual fixed interest rate users will be well in the double digits. 

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