 is expected to ease mortgage repayments and provide a boost to the property market and economy.){kind=link}
A sharp decline in Hong Kong’s interbank offered rates (Hibor) is expected to benefit mortgage borrowers and companies, potentially boosting the city’s property market and broader economy. The one-month Hibor, linked to mortgage loans, dropped to a 30-month low of 2.0945 percent, almost a full percentage point lower than the previous day. Rates for three and six months also saw significant reductions, with drops of 61 and 34 basis points, respectively.
For a typical HK$5 million loan over 30 years, priced at one-month Hibor plus 1.3 percent, monthly repayments would fall by HK$306 (US$40), reducing the mortgage rate to 3.39 percent from 3.5 percent. This immediate decrease in repayments will be welcomed by mortgage borrowers, particularly those with Hibor-based loans. Experts anticipate that as Hibor continues to decline in the coming months, capital inflows into the stock market will likely encourage more property purchases.
Hong Kong Monetary Authority (HKMA) chief executive Eddie Yue Wai-man predicted that Hibor would remain low following the HKMA’s intervention to defend the currency peg. The HKMA spent HK$129.4 billion to buy US$16.7 billion worth of US currency, boosting the aggregate balance and liquidity in the banking sector. Yue stated that a lower Hibor would ease the financial burden for both mortgage borrowers and businesses, positively impacting the economy.
The three-month Hibor, which is used to price corporate loans, dropped to 2.7703 percent, a significant decrease from 4.2039 percent earlier this year. This reduction is expected to ease funding pressures for businesses, although the benefits may be tempered by ongoing uncertainty in global trade. Analysts noted that while lower Hibor could help developers and landlords, the overall economic impact would depend on external factors like the trade war.
While most borrowers will benefit from the lower rates, some major lenders, including HSBC and Standard Chartered, chose to keep their prime rates unchanged after the HKMA held its base rate steady. However, expectations are high that lenders will reduce prime rates later in the year. The drop in Hibor coincides with a shift in the mortgage market, with more people opting for prime-rate or fixed-rate loans as Hibor-based loans declined.
The decline in Hibor has sparked optimism in the property market, with developers like Sun Hung Kai Properties expecting lower mortgage burdens to boost buyer confidence. Their latest development, Sierra Sea, saw a price increase of 2.3 percent from the previous month, indicating growing interest from buyers in a more favorable mortgage environment.
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