Following the US Federal Reserve's decision to hold its benchmark interest rate within the 3.5% to 3.75% range, Hong Kong's three major note-issuing banks have kept their prime lending rates unchanged.

HSBC was the first to announce that its best lending rate would remain at 5%. Subsequently, BOC Hong Kong (Holdings) Ltd. (SEHK: 02388) and Standard Chartered Hong Kong also confirmed that their Hong Kong dollar prime rates would stay at 5% and 5.25%, respectively.

Inflation Concerns Delay Fed Rate Cut Expectations

According to market analysis, the robust U.S. labor market and persistently low unemployment, coupled with geopolitical tensions driving up energy prices, have elevated inflation figures. With the Consumer Price Index (CPI) rising 4.2% year-on-year in May—reaching a three-year high—the Federal Reserve is not anticipated to lower interest rates in the near term.

Interbank Rates Expected to Hold, Mortgage Costs Remain at Cap

The one-month Hong Kong Interbank Offered Rate (HIBOR) was quoted at 2.94%. Analysts note that for the prevailing new HIBOR-linked mortgage plans, typically priced at H+1.3%, the HIBOR would need to fall below 1.95% for the effective mortgage rate and monthly repayments to decrease further.

However, with U.S. rates holding steady and the Hong Kong banking system's aggregate balance remaining around HK$53.9 billion, there is limited room for a significant decline in HIBOR. It is projected to fluctuate within a range of 2% to 3% in the short term. Consequently, homeowners with HIBOR-linked mortgages will likely continue to pay at the prevailing cap rate of 3.25%.

Advice for Homebuyers Amid Interest Rate Uncertainty

Given the ongoing uncertainty surrounding U.S. interest rates and monetary policy, prospective homebuyers are advised to maintain long-term, prudent financial planning. It is crucial to monitor interest rate trends closely, avoid borrowing to the maximum limit, ensure sufficient liquidity, and carefully assess personal affordability before entering the property market.

Analysts point out that the current standard new HIBOR-linked mortgage rate of 3.25% remains a reasonable and manageable level. Opting for fixed-rate mortgage plans offered by major banks, which provide rates as low as 2.73% for the first three years, could result in significant interest savings, effectively providing an early rate cut.

Positive Outlook for Hong Kong's Property and Mortgage Markets

Furthermore, with property prices stabilizing and transaction volumes increasing notably, public confidence in home purchases and investment is strengthening. The property market is expected to exhibit a pattern of rising prices and transaction volumes in the second half of the year.

Some banks are adopting an aggressive stance in the mortgage business, actively competing for market share throughout the year. They are rolling out various mortgage plans and enhancing cash rebate incentives to attract high-quality clients. The mortgage market is forecast to grow steadily alongside the recovery and stabilization of the property sector.