HK Property Market Braces for Interest Rate Hikes Amid Fed Expectations
Markets in Hong Kong are bracing for potential interest rate hikes following comments from US Federal Reserve Chairman Kevin Warsh. The CME FedWatch tool, which tracks Fed funds futures contracts, indicates a 60% likelihood of a quarter-percentage-point increase in the US target interest rate this month.
The Linked Exchange Rate System has tied Hong Kong's monetary policy to the Fed since 1983, but local banks can adjust their prime and savings rates independently. Analysts say more homebuyers are opting for fixed-rate mortgages with unchanged interest rates, even if the Hong Kong interbank offered rate (Hibor) or the prime rate rises.
Knight Frank's Esther Liu notes that market consensus suggests local banks will only follow a prime rate hike after back-to-back Fed rate increases or significant funding cost rises. If some banks do increase their fixed-rate mortgage plans, actual mortgage financing costs are expected to remain stable due to an effective mortgage rate cap of 3.25%.