UBS Group's report states that the relaxation of mortgage requirements by the Hong Kong Monetary Authority will have a positive effect on Hong Kong banks. The bank believes that further relaxation of mortgage requirements may increase demand for mortgages, but the impact may be relatively limited.

According to reports citing local media, some Hong Kong banks have tightened the lending criteria for nano flats, with interest rates increasing from P+1 to possibly 5.8%, which poses an upward risk to the maximum interest rates of all residential mortgages in case the U.S. Federal Reserve fails to timely cut its policy rates. However, this move could further alleviate the interest margin pressure faced by banks, given that as of April this year, residential mortgages accounted for 19% of the total loans in the banking system.

UBS is bullish on the Hong Kong banking industry for several reasons, including high dividend yields of 8% to 10%, ample capital buffers to cushion against slow risk-weighted asset growth, which shows room for further increasing shareholder returns, market expectations that the US Federal Reserve will delay and reduce the extent of interest rate cuts, supporting banks' net interest margins, and significantly relaxed mainland property policies, reducing banks' mainland property risk exposure.

However, the bank points out that recent tightening of mortgages may have a negative impact on real estate sales and developers. The bank's real estate team predicts that the median house prices in Hong Kong will fall by 0% to 5% for the full year.