A special fixed-rate under the Mortgage Corporation's Fixed Adjustable Rate Mortgage Programme has been launched. It gives homebuyers loans with a fixed-rate period ranging from one to 10 years.

The corporation will run the scheme with the Bank of China, Bank of East Asia, DBS Bank, Hang Seng Bank, HSBC and ICBC (Asia).

It is an extension of the loan tenor under the programme from five to 10 years. Borrowers can apply for mortgage loans with a loan-to-value ratio of up to 95% for a designated fixed-rate period of one, two, three, five, seven and 10 years with rates ranging from 5% to 5.6%.

Scheme features

The scheme will enable mortgage borrowers to lock in a predetermined rate that remains fixed during the designated period and insulated from any volatility in interest rates.

At the end of the fixed-rate period, borrowers will have a choice of either re-fixing the mortgage rate for another term at the then prevailing fixed rate offered by the corporation or converting the mortgage loan to a pre-committed floating rate of Prime - 2.25% per annum.

Another attraction is the prepayment penalty period is capped at three years for fixed-rate periods exceeding three years and up to 10 years.

Triple-win situation

The corporation's Chief Executive Officer James Lau said the special scheme will bring significant benefits to the mortgage market and represents a triple-win situation.

To the homebuyers, it provides an additional choice of mortgage financing that enables them to lock in an attractive mortgage rate for up to 10 years, he said.

To the participating banks, their partnership with the corporation provides an effective avenue for procuring new mortgage businesses and marketing their banking products to the borrowers.