HKMA raises rates after US Fed move, reiterates warning to home buyers
Base rate rises by 0.25 percentage points, tracking Fed move
The Hong Kong Monetary Authority raised its base rate by 0.25 percentage points on Thursday morning, following the US Federal Reserve’s overnight move.
In announcing the decision, HKMA chief executive Norman Chan Tak-lam reiterated his warning to Hong Kong home buyers that mortgage rates will rise in the near future. The city’s average home prices have soared for many consecutive months to a record, making Hong Kong the world’s most expensive major urban centre.
Still, deep-pocketed buyers had been packing property sales to snap up new apartments, with some buyers purchasing multiple units. The exuberance is raising concerns among policymakers that a sudden downturn in the property market may leave banks and borrowers alike struggling.
“This is the Fed’s third increase in seven months, and is a sign that the pace of rate normalisation is gathering momentum,” Chan said. “As interest rates rise, I would urge everyone to be vigilant and manage their risks carefully.”
Hong Kong’s base rate now stands at 1.5 per cent. The HKMA, Hong Kong’s de facto central bank, is obliged to follow US interest rates as Hong Kong’s currency is pegged to the US dollar.
On Wednesday afternoon US time, Fed chair Janet Yellen matched market expectations by increasing the US federal funds rate by 25 basis points to between 1.00 and 1.25 per cent.
