Hong Kong’s central bank warned lenders in the city that their 'intense price competition' on mortgages isn’t sustainable and may erode industry profit margins and increase risks.

Banks have cut home loan rates 'to such an extent that they might not have given due regard to the reputation risk, interest rate risk and liquidity risk potentially associated with their pricing,' Hong Kong Monetary Authority Deputy Chief Executive YK Choi said in a letter to the Hong Kong Association of Banks, which was published on the HKMA Web site.