Singapore and Hong Kong banks may refocus on corporate lending

RoRWA on mortgages becomes increasingly less attractive.

Barclays believes that mortgage rates will rise independent of US interest rate hikes due to tightening system liquidity in Singapore and falling returns on risk weighted assets (RoRWA) due to regulatory tightening measures in Hong Kong.

Here's more from Barclays:

If competition restricts upward mortgage pricing, banks will increasingly refocus their efforts on corporate lending as RoRWA on mortgages becomes increasingly less attractive.

Mortgage risk weights are currently as low as 5% for banks using the internal ratings based (IRB) approach due to low probability of default (PD) assumptions used in their internal models given historically low through-the-cycle losses on default.