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Major local banks have raised the prime rate by 0.125 percentage points following a US interest rate hike and further capital outflow from Hong Kong as CK Asset sees property transactions declining in the short term.
Hongkong and Shanghai Banking Corp and BOC Hong Kong raised the prime rate to 5.75 percent and Standard Chartered HK to 5.875 percent after the US Federal Reserve lifted the interest rate by 0.25 percentage points and hinted at a pause in June.
Hang Seng Bank and Bank of East Asia followed suit with the same interest rate rise.
After the adjustment, a homeowner carrying a HK$5 million mortgage loan with a 30-year term needs to repay HK$347 more to HK$22,452 per month says mortgage consultant mReferral.
The mortgage-related one-month Hong Kong interbank offered rate reached a four-month high of 3.63 percent yesterday.
However, the increased repayments could be compensated by recent incentives offered by banks, including higher cash rebates and a lower cap rate of mortgage plans based on the Hibor, said Centaline Mortgage.
William Kwok Tze-wai, chief manager of sales at CK Asset, expects property transactions to slump 30 percent in the short run and home prices to stay flat in the first half.
But as the US interest rate hiking cycle likely nears the end, Henderson Land and Sun Hung Kai Properties believe this prime rate rise will have limited impact on the local property market.
Ricacorp Properties expects home transactions and prices to rise further in the second half. Midland Realty believes the deals in the secondary market will rebound to 4,000 or above. The hiking cycle seems to have not affected the sales of new homes.
SHKP sold all flats offered on price lists at Phase 2A University Hill in Tai Po after the sales of 191 units kicked off yesterday and the prospectus for Phase 2B uploaded on the same day.
Swire Properties reported a deal at Eight Star Street in Wan Chai for HK$43.5 million by tender, or HK$47,645 per square foot.
Centaline Property Agency said the number of foreclosure cases could retreat to a double-digit level by the end of the year as home prices have recovered over 6 percent and the interest rates are likely to peak.
The prime rate rise came after the Hong Kong Monetary Authority bought HK$4.67 billion from the market. The city’s aggregate balance, a measure of interbank liquidity, will drop to HK$44.53 billion today, its lowest level since 2008.
Major local lenders increased their saving interest rates to attract cash from customers. BOCHK, StanChart HK, Hang Seng and BEA offer an annual interest rate of 0.75 percent for HK dollar demand deposit accounts, up from 0.625 percent.
If Hibor keeps climbing, Hong Kong’s lenders could raise the prime rates by another 0.125 percentage points, said mReferral.
Many believe the Fed’s tightening cycle is over but a rate cut may not occur this year.
Fed chair Jerome Powell said the rate-setting committee doubted whether the inflation would come down quickly and thus it would be inappropriate to cut rates, despite signs of a slowdown and risks of a banking turmoil.
The European Central Bank increased interest rates by 25 basis points to 3.25 percent yesterday.
Category: Hong Kong
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