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Hong Kong banks will raise their lending rates further in 2023 as Fed seeks to tame runaway US inflation, analysts say
- All 10 economists polled by the Post predicted the prime rate will rise in 2023 by up to 1 percentage point
- If their forecasts are right, the prime rate could hit 6.875 per cent per annum, a level last seen in late 2007
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Hong Kong borrowers will need to dig deeper to pay off their mortgages and other loans as commercial banks are set to increase their interest rates further in 2023, according to a poll of 10 economists by the Post.
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All 10 predicted the banks’ prime rates will continue to climb this year, with three forecasting a rise of at least 25 basis points in the first half. Five expect the rise to be between 37.5 and 50 basis points, and the other two believe they will go up by a full percentage point.
“The US inflation rate remains so high that the Fed will need to increase its rate by one full point in 2023, and Hong Kong banks will follow suit and increase their prime rate by 100 basis points,” said Bruce Yam, an independent currency-market analyst.
If their predictions are right, the prime rate will go up to between 6 per cent and 6.875 per cent per annum, a level last seen in late 2007 before the global financial crisis.
Hong Kong banks have already increased their prime rate three times in 2022, by a total of 62.5 basis points. HSBC, Bank of China (Hong Kong) and Hang Seng Bank are now pricing their best lending rate at 5.625 per cent per annum, while Standard Chartered, Bank of East Asia and other lenders have increased theirs to 5.875 per cent.
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The local currency has been pegged to the US dollar since 1983, which means local interest rates move in lockstep with the US.
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