The end of Hong Kong’s ‘super low interest rate environment’ could spell trouble for families, city’s finance minister warns
Paul Chan Mo-po comments on news that 15 banks are set to increase their mortgage rates, making it harder to own a home in the city
Hong Kong’s long-maintained “super low interest rate environment” may soon end, which could bring adjustment to the red-hot property market, adding pressure on family debt and assets, the city’s financial chief has warned.
Existing mortgage borrowers, who have a total of HK$1.26 trillion in outstanding mortgage loans, may soon face similar pressure as banks are expected to increase their best lending rate, or prime rate, as early as the end of this month – the first rise in 12 years.
In his blog post, Chan said the United States, which had increased interest rates seven times since late 2015, was likely to have another two increases in the second half of this year.
He added that the ongoing trade war between China and America would affect the US’s economic outlook and inflation, adding to the uncertainty of the country’s future interest rate increases.
“Under the linked exchange rate system, Hong Kong has to follow suit to increase interest rates sooner or later,” Chan said. “The past long period of a super low interest rate environment may soon end.”
Chan pointed out that about half of Hong Kong families’ assets were related to property, which would inevitably be affected by any market adjustment.