HSBC, Hong Kong’s biggest note-issuing bank, and DBS Hong Kong will keep their key lending and deposit rates unchanged, meaning mortgage borrowers and companies face a longer wait for relief from high borrowing costs.
HSBC will keep its prime lending rate at 5.875 per cent, while paying 0.875 per cent per annum for savings deposits over HK$5,000 (US$640) and nothing to those below that, the bank said in a statement on Thursday.
DBS Hong Kong also said it would keep its prime rate unchanged at 6 per cent and will also maintain its saving deposit rate at 0.23 per cent to 0.75 per cent, depending on the amount.
The other two note-issuing banks – Standard Chartered and Bank of China (Hong Kong) (BOCHK) – and other lenders will announce their rate decisions later this afternoon. Analysts widely expect they will keep their key rates unchanged.
The lenders’ decisions came after the Hong Kong Monetary Authority (HKMA) followed the US Federal Reserve in keeping interest rates at current levels on Thursday morning.
The HKMA kept Hong Kong’s base rate unchanged for the seventh time at 5.75 per cent, in lockstep with the Fed’s move hours earlier. The de facto central bank has followed the Fed’s rate decisions in lockstep since 1983 under its linked exchange rate system to preserve the local currency’s peg to the US dollar.
While most traders still expect rate cuts to begin in September, the HKMA cautioned the public that high interest rates may persist for some time.
The city’s lenders raised their prime rates five times from September 2022 to July 2023 by a total of 87.5 basis points to the highest level since 2007. The prime rate at BOCHK, HSBC and its subsidiary Hang Seng Bank is set at 5.875 per cent. The rate at Standard Chartered, Bank of East Asia, Citigroup, CCB Asia and other lenders stands at 6.125 per cent.
“If the data allows, the US Fed will deliver rate cuts probably in September,” said Ryan Lam Chun-wang, Hong Kong head of research at Shanghai Commercial Bank. “Hong Kong lenders will possibly cut rates in the first half of 2025. The rate cut will be helpful in lifting some pressure from rate-sensitive sectors, such as property and small and medium-sized enterprises.”
While the HKMA must change the official base rate with any change by the Fed, Hong Kong’s commercial banks can decide when to change their own prime rates. Usually they do not change the rate immediately when the US does, rather waiting a few months for the rate cut to impact the interbank rate in Hong Kong.
