Hong Kong’s top two banks lift lending rates for first time in 12 years

HONG KONG: Two of Hong Kong’s biggest banks raised their lending rates yesterday for the first time in 12 years, ending an age of cheap cash that could hit the city’s famously red-hot property market.

The moves by HSBC and Standard Chartered came after the Hong Kong Monetary Authority (HKMA) – the city’s de facto central bank – lifted its borrowing costs following an increase by the US Federal Reserve. The HKMA is required to lift rates in line with the Fed owing to the dollar peg.

HSBC boosted its lending rate 12.5 basis points to 5.125%, before Standard Chartered lifted its rate from 5.25% to 5.375%.

“Today’s change in rates marks the start of the normalisation cycle for local interest rates and we believe Hong Kong is well prepared for the change,” said Diana Cesar, HSBC’s CEO in Hong Kong.

More of the city’s commercial banks are expected to follow HSBC’s lead and hike their prime rates, meaning higher mortgage payments for loans that are linked to it.

The Federal Reserve raised the benchmark interest rate on Wednesday for the third time this year in a widely anticipated decision, citing the strong US economy and jobs market.

After the HKMA raised interest rates to 2.5%, its CEO Norman Chan warned the public to be “on high alert” over increases and to manage associated risks, adding that property and assets would be affected.

“The current global economic conditions and financial environment are full of uncertainties for Hong Kong,” he said.

Hong Kong’s finance secretary Paul Chan wrote in his blog earlier this week that the city’s low interest rate environment was “coming to an end soon”. – AFP