The Hong Kong Monetary Authority (HKMA) raised the base rate by 25 basis points to 1.5 percent. The increase follows a 25-basis-point increase in the target range for the US federal funds rate.
HKMA chief executive Norman Chan said mortgage rates will rise in the near future.
“This is the Fed’s third increase in seven months, and is a sign that the pace of rate normalisation is increasing,” he said.
“As interest rates rise, I would urge everyone to be vigilant and manage their risks carefully,” Chan.
He said the public should not “underestimate the impact of higher interest rate on the serviceability of their debts”, especially mortgage loans, most of which are of a long tenor of 20-30 years.
“It would be prudent that one should not overstretch himself in taking out such loans.”
Chan also said that at the moment there is abundant liquidity in Hong Kong’s banking system but as the interest rate differential widens between the Hong Kong dollar and the US dollar “we expect capital outflows to increase”.
However, Chan said systemic liquidity was not the only factor affecting mortgage rates.
The base rate is the interest rate the HKMA charges licensed banks when they need liquidity.
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