HK banks increase rates for the first time in 12 years

Property market may cool as HK sees first rate hike in years

Property market may cool as HK sees first rate hike in years

This latest move, which is the third this 2018 and the eight ever since the end of "quantitative easing" in December 2015, will force commercial banks in Hong Kong to raise the prime rate for the first time after 12 years. According to the website of HKMA, the base lending rate raised by 25 basis points to 2.5 percent, effective immediately.

HSBC Holdings Plc raised its main lending rate in Hong Kong for the first time in more than a decade, closing the chapter on an era of ultra-low borrowing costs that sent property prices skyrocketing.

HSBC and Hang Seng each boosted their lending rate 12.5 basis points to 5.125 per cent, while Standard Chartered lifted its rate from 5.25 per cent to 5.375 per cent.

The result was the siphoning of huge liquidity reserves of the banking system of the city, that contributed previously to control the interbank rate Hong Kong InterBank Rate (HIBOR).

Hong Kong tracks USA interest rate moves because its currency is pegged to the US dollar, although local banks have some leeway to lag USA moves when setting their "prime rates". "Going forward, interest rates will go up", said Hong Kong Finance Secretary Paul Chan.

The HKMA raised interest rates to 2.5 percent.

World's first human case of rat disease found in Hong Kong
The virus causes hepatitis, an inflammation of the liver, and can not be cured but usually heals on its own. Symptoms include fever, vomiting and jaundice, and in rare cases liver failure.

Several other commercial banks in the territory semi-autonomous southern China should take example on HSBC and Standard Chartered, and raise their base rate, which implies an increase in the cost of credit that are backed.

Higher rates threaten gains in home prices that have been on a bull run for most of the past 15 years.

"The impact on our asset market is yet to be seen but this puts a high risk on the asset market because of the interest rate burden, because of the uncertainty brought about by the escalating trade conflicts between the USA and China, as well as external uncertainties in the emerging markets and Europe", Chan said at a briefing following the HKMA's decision. The average mortgage payment-to-income-ratio in Hong Kong is about 35 percent, she said. "The super-low interest rate environment in Hong Kong probably will finish". But cooling the world's bubbliest property market could tax economic activity.

The HKMA has spent billions this year supporting the currency as it hits the bottom end of its permitted HK$7.75-7.85 band against the United States dollar.

As per the data of the monetary authority, the outstanding mortgage loans in Hong Kong stood at HK$1.26 trillion (US$161.3 billion) at the end of June.

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