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Hong Kong’s banks raise prime rates for the first time in 4 years as cost of money soars to 14-year high
- HSBC, Standard Chartered, Bank of China (Hong Kong), Hang Seng Bank and Bank of East Asia raised their best lending rate for borrowers by 12.5 basis points
- The first increase in prime rates in four years will hurt the property market and Hong Kong’s economy, analysts say
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Five of Hong Kong’s largest banks said they would raise their prime rates for the first time in four years, taking the lead to increase the cost of money as surging interest rates spill over to the city’s households and corporate borrowers.
The best lending rate of HSBC, Bank of China (Hong Kong) and Hang Seng Bank will rise by 12.5 basis points to 5.125 per cent starting on Friday, Monday and Tuesday respectively, while the prime rates of Standard Chartered and Bank of East Asia will increase to 5.375 per cent. The savings rate on Hong Kong dollar deposits will go up by 12.4 basis points, the five banks said.
The moves followed the 75-basis point rate increase by the US Federal Reserve overnight, which was mirrored by an increase of the same magnitude by the Hong Kong Monetary Authority (HKMA).
“Anticipation around a potential prime rate increase in Hong Kong has been ripe and today’s announcement marks the beginning of an upwards cycle,” HSBC’s Hong Kong chief executive Luanne Lim said in a statement. “We have considered multiple factors, including the macroeconomic environment, [the interbank rate] trends as well as the impact on our economy and the community.”
Other banks are expected to follow the lead by Hong Kong’s major banks. The last time the lenders raised their prime rates was a 12.5-basis point increase in September 2018, as they waited through nine rounds of hikes by the monetary authorities between 2015 and 2018 before passing the higher cost of money to their customers.
Enoch joined the Post as a business reporter in 1996. Before that, she worked at a Chinese daily newspaper for four years. She is the author of two books: 'They Mean Business: 50 exclusive interviews with Hong Kong top executives' and 'Serving with Passion: stories of established catering brands in Hong Kong'.
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