Hong Kong confronted by bleak outlook, with banks’ record high borrowing costs set to hit property market, economy

The one-month Hibor hit a 29-month high on Friday, while three-month Hibor was close to a 14-year high

An increase in the Hibor is set to force banks to increase prime rates this month, Everbright Securities analyst says

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Hong Kong’s Central business district. The one-month Hibor stood at 0.15 per cent at the beginning of this year, while the three-month rate was at 0.25 per cent. Both are expected to rise further this year. Photo: Winson Wong

Published: 4:30pm, 11 Sep 2022

The interest rates Hong Kong’s banks charge each other for borrowing money have hit new highs and are expected to drive up their funding costs.

The one-month Hong Kong Interbank Offered Rate (Hibor) – the benchmark for mortgage loans – rose to 2.01 per cent on Friday, a 29-month high, according to mortgage broker mReferral. The three-month Hibor, the benchmark for corporate loans, climbed to 2.79 per cent, nearing a 14-year high.

The one-month Hibor stood at only 0.15 per cent at the beginning of this year, while the three-month rate was at 0.25 per cent. MReferral said it expected both to rise further this year.

A widening interest-rate gap between Hong Kong and the US has contributed to a flight of capital out of the Hong Kong dollar market and has increased funding costs at banks in the city.

HSBC and Standard Chartered Bank in Hong Kong’s Central. Both banks have kept their prime rates steady for now. Photo: Nora Tam

The US Federal Reserve has increased interest rates four times since march to control inflation. Last month, it increased interest rates by 75 basis points for a second straight month after US inflation topped 9.1 per cent in June and was well above its 2 per cent target. The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, has moved in lockstep with the Fed to help maintain the peg between the US dollar and the local currency.

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