This Sept 8, 2017 photo shows The Centre skyscraper, center, located in Hong Kong’s bustling Central district. (ANTHONY WALLACE / AFP)
Hong Kong’s base rate hike on Thursday following the US Federal Reserve’s move will not affect the city’s monetary and financial stability, but the effect on the housing market needs to be watched, officials and experts said.
The Hong Kong Monetary Authority on Thursday raised the city’s base rate by 25 basis points to 5 percent in lockstep with the Fed’s hike as the Hong Kong dollar is pegged to the greenback in a range of 7.75 to 7.85 Hong Kong dollars per US dollar.
Major banks, including HSBC, Hang Seng Bank and Bank of China Hong Kong, said that they will keep their best lending rate unchanged at 5.625 percent, while Standard Chartered will maintain its prime rate at 5.875 percent.
HKMA CEO Eddie Yue Wai-man said the US rate hike will not affect the monetary and financial stability of Hong Kong, adding that the city’s monetary and financial market continues to operate in a smooth and orderly manner
HKMA CEO Eddie Yue Wai-man said the US rate hike will not affect the monetary and financial stability of Hong Kong, adding that the city’s monetary and financial market continues to operate in a smooth and orderly manner.
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Yue said the rate hike cycle in the US has not yet been completed, and the Hong Kong dollar interbank rates might remain at elevated levels for some time.
He cautioned the public to be prepared for the possibility of further increases in bank lending rates and to carefully assess and manage the risks when making property purchases, taking out mortgage or making other borrowing decisions.
The interest-rate hike cycle is gradually ending, as the US inflation rate has shown a downward trend after rising to a high of 9 percent in the fourth quarter of last year, said Patrick Chan, deputy general manager of private banking of Bank of China Hong Kong.
He said he believes that this year will still see one or two more rate hikes by the Fed, adding that the hikes will not stop until after the ultimate rate rises to 5 percent.
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Eddie Hui, professor of the Department of Building and Real Estate at the Hong Kong Polytechnic University, said the US rate hike could likely affect Hong Kong’s housing market by dampening people’s willingness to buy homes.
If Hong Kong’s housing price continues to drop, the number of negative equity will grow, he warned. But he said there is no need to be too worried, as the market sentiment now is mainly positive.
Hong Kong recorded 12,164 cases of negative equity in the fourth quarter, representing an 18-year high, according to the latest data released by HKMA. Negative equity is a market value that is less than what the owner owes on it.
Since March 2022, the Fed has raised interest rates a total of 450 basis points.