Hong Kong banks kept their prime rates unchanged on Thursday after the Hong Kong Monetary Authority (HKMA) held its base rate steady in line with the US Federal Reserve.

In a statement, HSBC said it was leaving its prime rate unchanged at 5.875 percent, while its Hong Kong dollar deposit rate also remained the same.

Later in the day, its subsidiary, Hang Seng Bank, as well as Bank of China (Hong Kong) also kept their prime rates unchanged at 5.875 percent, while Standard Chartered maintained its prime rate unchanged at 6.125 per cent.

The lenders also held their Hong Kong dollar deposit rates steady.

The announcements came after the HKMA retained its base rate at 5.75 percent after the Fed's decision to leave rates unchanged.

In an interview with RTHK, Centaline Mortgage managing director Ivy Wong predicted that local prime rates are likely to stay at the current high level for a while, despite the possibility of rate cuts by the Fed this year.

“Because the city’s prime rates have only increased by 0.875 percent amid the rate hike cycle this time, which is four percent less compared with the total rate increases in the US,” she said.

“Only when the city’s ‘H Plan’ mortgage rate, or Hibor rate, is lower than the ‘P Plan’ mortgage rate, or the prime rate-based mortgage rate, will local commercial banks have the conditions to reduce their prime rates.”

The one-month Hong Kong Interbank Offered Rate (Hibor), which is used to price the majority of local mortgages, dropped to 4.56 percent while the three-month Hibor dropped to 4.7 percent following the latest rate pauses.

The Hibor rates, for now, are still higher than “P Plan” mortgage interest rates which have been maintained at the 4.125 percent level.

Commenting on the Fed's decision, Belle Liang, Chief Investment Officer at Hang Seng Bank, said market confidence in the “downward trend of interest rates this year is still rising, and not decreasing".

Liang noted that prices of long-term US Treasuries advanced, while equity markets suffered a setback following Powell's hints.

“We expect that funds will continue to flow into the investment-grade US bond market to lock in yields for the next few years, and the lower interest rates will also increase the overall return of bonds,” she said.
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Last updated: 2024-02-01 HKT 16:28