Three of Hong Kong’s biggest banks yesterday raised their lending rates for the first time in 12 years, ending an age of cheap cash that could hit the territory’s famously red-hot property market.
The announcement sparked a government warning about the effects on borrowers in the city, while the de facto central bank warned of “uncertainties.”
The moves by HSBC Holdings PLC, Standard Chartered PLC and Hang Seng Bank Ltd came after the Hong Kong Monetary Authority lifted its borrowing costs following an increase by the US Federal Reserve.
The authority is required to lift rates in line with the Fed owing to the US dollar peg.
HSBC and Hang Seng each boosted their lending rate 12.5 basis points to 5.125 percent, while Standard Chartered lifted its rate from 5.25 percent to 5.375 percent.
“Today’s change in rates marks the start of the normalization cycle for local interest rates and we believe Hong Kong is well prepared for the change,” said Diana Cesar, HSBC’s chief executive officer in Hong Kong.
More of the territory’s commercial banks are expected to hike their prime rate, meaning higher mortgage payments for loans that are linked to it.
“The super-low interest rate environment in Hong Kong probably will finish. Going forward, interest rates will go up,” Hong Kong Financial Secretary Paul Chan (陳茂波) said.
“Higher interest rates will add to the burden of homeowners with mortgages,” Chan added, urging investors to “exercise caution in managing their investment and risks.”
Prior to the rates hike Chan had written on his blog that the property market had shown signs of cooling in recent weeks.
Shares in Hong Kong property firms turned south yesterday, with Sun Hung Kai Properties Ltd (新鴻基地產), Sino Land Co (信和置業) and Country Garden Holdings Co (碧桂園) all taking a hit.
After the authority raised interest rates to 2.5 percent, its chief executive officer Norman Chan (陳德霖) 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.
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