The Hong Kong Monetary Authority's deputy chief executive believes banks will need a period of stability before lowering lending rates.
David Carse said interest rates would not drop to last year's levels, claiming they were 'probably too low'.
Intense competition for mortgage business last year resulted in banks charging just over the prime rate of 8.5 per cent.
Rates of about 11.75 to 12 per cent are now available with the prime rate at 10.25 per cent.
Mr Carse said the authority expected bad loans to increase, but did not believe the situation would be overwhelming.
'Looking ahead to 1998 it would be reasonable to see the bad-debt situation getting worse because of the slowdown . . . [However] we are not expecting to see a disastrous increase.
