"Banks will raise interest rates in the first half of next year at the earliest, as it's uncertain if the global economy will continue to pick up," said Wong, who is also executive director of Hongkong and Shanghai Banking Corp. "The economy has bottomed out. However, a rebound will depend on upward momentum, which will be clear at Christmas."

Benjamin Hung Pi-cheng, chief executive of Standard Chartered Bank (Hong Kong), also said banks will not raise interest rates in the short term as countries have to assess their economic development. He said he is not concerned about an asset price bubble, given the SAR's robust economy and people's saving habits.

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China Construction Bank (Asia) recently became the first local lender to raise mortgage rates after the Hong Kong Monetary Authority said in September that interest rates were too low.

But other banks are unlikely to follow suit since competition for mortgage business is still keen, according to Ivy Wong Mei-fung, managing director of Centaline Mortgage Broker. "Since the US will be likely to raise rates gradually from 2010 second quarter, Hong Kong banks will follow the act at the same time, or in the third quarter," Wong said.

Echoing the HKMA's concern on mortgage risk, HSBC's Wong said lenders have tightened lending requirements for residential mortgages.

He believes it is important to ensure that people from the lower to middle classes can afford to buy homes.

The HKMA said Hong Kong dollar loans resumed growth in the second quarter, probably due to the more active equity and property markets.

"While the inflow has not yet led to significant credit creation, we will need to monitor developments closely, and guard against the risk of any excessive credit expansion by banks," it said.