Editorial | Danger still exists for borrowers, lenders in Hong Kong
- Hong Kong’s financial system is robust, but prudence is called for as even steady interest rates are likely to remain high for a while next year
Stock and bond prices rose last week in the United States, so did Hong Kong equities. Why? Not only has the US Federal Reserve held interest rates steady for a second time, the latest jobs report in the US showed a big slowdown in hirings.
That’s bad news for American jobseekers, but good news for investors, many of whom are hoping that interest rates have peaked. Thanks to the US dollar currency peg, rates in Hong Kong should hold steady, too. That should bring some relief to long-suffering mortgage holders.
Fed chief Jay Powell has described the US central bank as “proceeding carefully” with future rate rises; market players have termed it more colourfully as a “dovish pivot”.
His remarks have been taken as a sign that higher borrowing costs have sufficiently slowed down the US economy and so rates may have peaked.
But while rates may not rise for the rest of this year, they are at a two-decade high. That has exposed more Hong Kong homeowners to negative equity.
Amid slumping home prices, such “upside-down” loans jumped to 11,123 cases in the last quarter, according to the Hong Kong Monetary Authority. They translate to HK$59.3 billion, compared with HK$17.4 billion at the end of June.