HSBC, Bank of China cut lending rates even as HKMA warns of volatility ahead

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The latest rate cuts by HSBC and BOCHK will lighten the monthly burden on mortgage borrowers by about HK$351 to HK$22,452

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The HKMA’s interest-rate cut has given Hong Kong business owners and mortgage holders a reprieve. Photo: Shutterstock

Enoch Yiu

Published: 7:31am, 19 Dec 2024Updated: 1:07pm, 19 Dec 2024

Corrected [8:58am, 19 Dec, 2024]

[8:58am, 19 Dec, 2024]
The Fed said it would maintain its target rate in the range of 4.25 to 4.50 per cent and not in the range of 4.25 to 4.75 per cent

HSBC and Bank of China (Hong Kong) (BOCHK), Hong Kong’s top two banks, lowered their prime lending rates for a third time this year, trimming the cost of borrowing to the lowest level in two years.

HSBC said it would trim its prime rate by 12.5 basis points to 5.25 per cent from Friday, the lowest since August 2022. BOCHK said it would cut its rate by the same level from Monday. The banks also said they would reduce their savings rates by the same margin to 0.25 per cent annually on deposits above HK$5,000 (US$640), while no interest will be paid on deposits below that threshold.

Other lenders will announce their rate decisions later this afternoon, in line with HSBC’s move.

“HSBC has decided to lower its Hong Kong dollar deposit and lending rates following another US rate cut, bringing a cumulative reduction of 62.5 basis points since September,” said Luanne Lim, CEO of HSBC Hong Kong.

“The future path of rates remains highly uncertain going into 2025. We will continue to monitor the external environment and local economic outlook, ready to adjust our rates as needed.”

US Federal Reserve chairman Jerome Powell hinted at fewer rate cuts next year. Photo: AP

Lim’s concerns were shared by the head of Hong Kong’s de facto central bank who warned the interest rate environment would remain volatile next year after it cut rates for the third time this year in line with the overnight move by the US Federal Reserve, lowering the cost of funds to ease the burden on mortgage borrowers and companies.