hibor vs prime

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  1. #51

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    Sorry if I sound like a SCB salesperson. I am not. I also have some problems with their customer service at the moment and they seem a lot more disorganised than HSBC. I am opening a mortgage, credit card, current account, and savings account with them and it seems like they are 4 completely separate departments that dont talk to each other. I am sick of repeating myself to 4 different departments all the time. They even have my old address and new address in their database and keep sending different paperwork to different addresses.


  2. #52

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    Nov 2004
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    Quote Originally Posted by bdw:
    I have just signed a 20 year mortgage with Standard Chartered. I went with the Hibor plan. Its HIBOR + 0.7%, which means for this month is 0.75% interest rate. The cap is P-2.75%.

    One thing you guys have missed which is very important is that I can switch to a convention P- plan at anytime with no cost, not just after 1 year or 3 years. So if/when the HIBOR plan becomes more expensive than the conventional P- plan, I can switch straight away. This can be done only once.

    Knowing the above, there is absolutely no reason at all to go with a conventional P- plan. Unless you like to just throw money away.
    we signed the exact same deal two weeks ago...no question it was the best offer of all eight of the banks we were looking at...

  3. #53

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    ArKay- Glad I can be of help. I will check out the fine print on the contract when I get home to confirm how this loan switching function works.


  4. #54

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    Quote Originally Posted by bdw:
    Sorry if I sound like a SCB salesperson. I am not. I also have some problems with their customer service at the moment and they seem a lot more disorganised than HSBC. I am opening a mortgage, credit card, current account, and savings account with them and it seems like they are 4 completely separate departments that dont talk to each other. I am sick of repeating myself to 4 different departments all the time. They even have my old address and new address in their database and keep sending different paperwork to different addresses.
    heh, welcome to SCB.

    Yes, they do have good offers and have been very aggressive recently. However I get the feeling they are becoming victims of their own success.

  5. #55

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    May 2009
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    Is there any way of attaching a document to msgs on this site? I've been sent a graph that shows the fluctuations of Prime and HIBOR rate that might be interesting for people still trying to make a decision.


  6. #56

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    Yes if it's of certain file types. Press the Go Advanced button then the paperclip icon for attachments.


  7. #57

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    May 2009
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    HIBOR vs Prime rate graph

    Thanks PDLM.

    Graph shows the two rates from Jan 2006 to Dec 2009.

    Attached Files Attached Files

  8. #58

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    i have done a 25 years backtracking of hibor vs p- and there were only two phases when hibor was cheaper. 1. after the dot com crash for about 1-1.5 years and 2. since early/mid 2008 financial crisis.

    it cannot last my friends and the question is only whether demand has picked up enough at the point in time when government stop quantitative easing. if demand is solid, interest rates will only go up a bit to say 2-3%. if demand is not there, we will see another crash in which case the interest rates will go through the roof (say 5%) because either governments will throw money at the markets again but markets will not trust and demand a higher risk premium (speak interest rate) or markets will demand a higher risk premium because they do not trust the surviving companies (because of the crash). in either situation interest rates will go up and it's only a question of time.

    the interesting thing is that hibor is a funding cost basis only, whereas the prime rate is a asset and liability rate from a bank's point of view. this is why banks are much more reluctant to move the prime rate (compared to the moves of hibor) because it impacts their assets and liabilities directly.

    conclusion: if someone is going for a short term mortgage strategy or has a really low cap or the right to switch to prime at no major cost, hibor can be fine. else i would consider it too much risk and go with p- - which is what i personally did.

    full disclosure: i work in strategy at a bank in hong kong, so i am probably biased on the whole subject


  9. #59

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    OK I read my contract and confirm I can change from Hibor based to prime based at any time by simply giving the bank 14 days notice. No costs involved. But pin is correct that it will be at whatever the going rate is at that time.

    I havent been in Hong Kong long enough to know. but dont banks usually adjust the P and not the % off part? So if the best rate now is P-2.9%, then even if rates are higher in 12 months isnt it the P that is higher and I can still get P-2.9? Or do they adjust both sides of the equation?

    cookie09 - When one goes up, dont they both go up? So whilst hibor may go up first and fluctuate more, doesnt the prime rate generally sit somewhere above the Hibor rate? I mean, Hibor is the banks own cost of funds and they cannot lend lower than their own cost for a considerable length of time, can they? Sorry if its a stupid question, I dont work in banking


  10. #60

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    May 2009
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    bdw - my understanding is that yes, banks adjust their Prime rate, so if you take a mortgage at P-2.75 you will get 2.75% off whatever the bank's prime rate is for the tenor of the mortgage. But, banks offer different deals at different times I guess, so whilst at the moment a bank is offering P-2.75, they could change this for new mortgage applications in the future. And I guess that's where you could lose out if you take a HIBOR plan now, forgoing a great P- rate because that P- rate might not be being offered when you come to switch.

    Someone else correct me if I'm wrong on that. Blind leading the blind here!!


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