The US Federal Reserve announced that the benchmark interest rate remains unchanged at the 3.75% to 4% range. In fact, the Fed had conducted a defensive hike in the previous meeting, but the actual effect on controlling inflation remains to be seen. Therefore, the lack of change now is also reasonable. However, the US September consumer price index (CPI) increased 3.7% year-over-year, and the core CPI increased 2.6% over the same period, both higher than expected. With recent geopolitical tensions, if future inflation data remains high, the Fed is expected to raise interest rates again in December to curb inflation. If the Fed hikes in December, it is unlikely to have a significant impact on Hong Kong's property market. Given the current Hong Kong banking system's aggregate reserves hovering around HKD54 billion, coupled with weak demand for Hong Kong-dollar loans, the 1-month Hong Kong interbank offered rate (HIBOR) has remained below 3% since October. With no pressure on bank funding costs, the Hong Kong's most favorable lending rate (P) is expected to remain unchanged this time as well. Even if the Fed hikes in December, it is anticipated that Hong Kong banks will make only minor adjustments, with little actual impact on the broader property market. Under the current unchanged HIBOR and P rates, the 1-month HIBOR is likely to remain around 2% to 3% in the short term. Given the current general H-type loan rate of H+1.3%, borrowers will continue to pay the cap rate of 3.25% in the short term. However, the 2.73% fixed rate plan launched by large banks earlier this year has gained significant popularity with usage rates climbing to over 35%, setting a new high in over eight years and lowering overall new loan interest rates. The Hong Kong Mortgage Interest Rate Index (MMI), which reflects the actual interest rate levels for new loan clients, has maintained below 3.25% for eight consecutive months. The two types of fixed-rate plans have notable savings effects, and are expected to attract more buyers, potentially lowering the MMI further. In this uncertain interest rate environment, with HIBOR unlikely to fall significantly, these two loan plans offer significant savings, potentially attracting more buyers.
Borrowers should pay attention to market rates before entering the market, especially if they plan to buy apartment units still under construction. Early or delayed completion of the purchase can pose risks, and in the worst-case scenario, it could lead to losing deposits. Paul Choi, CEO of Knight Frank Mortgage, advises potential homebuyers to choose according to their financial capacity. With the diverse mortgage products offered by banks, it is important to closely monitor interest rate trends to avoid over-leveraging mortgages. It is recommended to use large, professional mortgage intermediaries to compare various package terms and benefits, selecting the plan that best aligns with one's financial planning.
While the standard H-type loan cap remains 3.25%, banks have slightly adjusted fixed rates to 2.93%, still lower than the H-type loan cap by 32 basis points. Another large bank has launched a 'P-to-H' plan for the first 2 to 3 years, with actual interest rates as low as 2.68%. Given future uncertain interest rates and HIBOR unlikely to fall significantly, these two types of loan plans offer notable savings, and are expected to attract more buyers, potentially further lowering the MMI. Paul Choi, Managing Director of Knight Frank Mortgage Intermediary, concludes by reminding potential homebuyers to carefully assess their financial capacity before making a purchase. With the various mortgage products available from banks, prospective buyers should closely monitor interest rate trends to avoid over-leveraging mortgages. It is advised to use large and professional mortgage intermediaries to thoroughly compare various package terms and benefits, and to select the plan that best aligns with one's financial planning.