Rate increase unlikely to impact property market

The Hong Kong Monetary Authority raised its benchmark interest rate by 50 basis points following the US Federal Reserve's move to raise rates for a second time this year, but the property market is unlikely to be affected.

The HKMA's base rate was increased to 1.25 percent from 0.75 percent, it said yesterday.

The benchmark rate increase will not affect the city's financial and monetary stability, HKMA chief Eddie Yue Wai-man said.

However, the capital outflows from the local currency to the greenback may go quicker due to the faster-than-expected rate-rise cycle by the Fed, Yue said.

Financial Secretary Paul Chan Mo-po said the government will work to ensure financial stability.

Hong Kong's banks maintained their best lending rates even as the monetary authority raised its benchmark interest rate, probably providing the economy some relief as it tries to recover from the pandemic.

The Hongkong and Shanghai Banking Corp and Hang Seng Bank kept their prime rate unchanged at 5 percent while Standard Chartered held the rate steady at 5.25 percent.

The Fed's hope is that the combination of a 50 basis-point increase and a shrinking balance sheet will deliver a soft landing for the US economy that avoids recession while tamping down inflation, said chairman Jerome Powell.

US stocks soared after Powell said policymakers were not considering 75 basis-point moves in the future. The Dow Jones Industrial Average surged 932 points and the US dollar fell to a one-week low.

Hong Kong stocks rose 400 points in the morning following the US stock market but closed 0.4 percent lower.

Real-estate consultancy firm Knight Frank said the interbank offer rate may rise in the short term, which will lead to higher costs on mortgage loans that are tied to the HIBOR, but not enough to affect overall purchasing power in the market.

If the HIBOR-based mortgage loan increases, some potential buyers may fail to pass through the pressure test, it added.

caroline.zheng@singtaonewscorp.com