Brace for more mortgage pain as HSBC, Hong Kong peers seen lifting prime rates with the Fed odds-on to tighten policy again
- Eleven of 13 analysts surveyed by the Post on Monday expect Hong Kong lenders to increase their prime rates by at least 12.5 basis points next week
- Higher borrowing costs will burden consumers with mortgage financing bills, ease pressure on capital flight to US dollar assets
That would deliver a blow to consumers servicing HK$1.83 trillion (US$232 billion) of outstanding home mortgages, as well as delay a recovery in the city’s real estate market and economy. The upshot is that it could help stem capital flight to higher-yielding US dollar assets.
HSBC, Standard Chartered, Bank of China (Hong Kong) (BOCHK) and their peers are likely to bump up their prime rates by 12.5 basis points to 25 basis points, to the highest level last seen in February 2008, according to 11 of the 13 analysts surveyed by the Post on Monday. Two predicted no change.
All 13 agreed the US central bank will lift its target rate by 25 basis points at its July 25-26 policy-setting meeting. Contracts on Fed fund futures implied a 96 per cent chance of a hike this month, while the odds are less than even for the other three remaining meetings in 2023.
“Hong Kong’s interbank liquidity is tight, the one-month Hibor stays at an uncomfortably high level,” said Desmond Tjiang, chief investment officer for equities at BEA Union Investment, which manages about US$7.3 billion of assets. “Banks will need to follow the US and raise their prime rates, albeit by a smaller magnitude.”
