Hong Kong's de facto central bank has lowered the base interest rate by 25 basis points to 4 percent, after a cut by the US Federal Reserve overnight.
It follows a cut in October and was the third reduction this year by the Hong Kong Monetary Authority.
The US interest rates will influence local rates but the future path of US monetary policy remains uncertain, said HKMA’s chief executive, Eddie Yue Wai-man.
Short-term Hong Kong interbank offered rate is affected by local market conditions, including month-end and year-end seasonal factors, as well as capital-market activity, Yue said, adding that local lenders have earlier indicated that deposit rates are already close to zero, which may be one factor when considering whether to lower their prime rates.
While saying lower borrowing costs from rate cuts will be positive for both the economy and the housing market, Yue also advised homebuyers and borrowers to carefully manage interest-rate risks.
On the mortgage issue related to the Tai Po fire, he said the situation is highly complex.
Any solution will depend on insurance and rebuilding arrangements, as well as whether legal proceedings are involved, Yue said, adding that banks have suspended repayments for residents for six months, providing room for all parties to work out how to handle the loans going forward.
