City's interbank rate jumps to 16-year high
The one-month Hong Kong Interbank Offered Rate (Hibor) which is used to price the majority of local mortgage loans has hit its highest level since October 2007. The Hong Kong Association of Banks on Monday said the one-month Hibor has risen 15 basis points to 5.53 percent, while the three-month Hibor, which determines corporate loans, reached 5.7 percent after rising about 7 basis points. This comes as demand for the local currency has been on the rise, with lenders piling up capital from the interbank system, amplifying an already tightened liquidity environment. “If there’s insufficient cash from banks, especially the smaller banks, they will borrow money from bigger banks and that causes the rates to increase in the markets and affects the mortgages,” said Hannah Jeong, head of valuation and advisory services at Colliers. While noting the relatively manageable impact from the fluctuations in Hibor rates due to the "interest rate cap" set for mortgage loans that are tied to Hibor, Jeong warned of future risks and pressure on the property market. “If Hibor rates continue to go up, the banks will also increase these caps, which will give more pressure in the home markets,” Jeong said, adding that the city’s property market could expect a quiet period between December and Chinese New Year as many potential buyers take a “wait and see” approach. “At the moment many people are waiting for the market to bottom down, and after reaching the bottom there may be some transactions,” Jeong said. She warned of price adjustments of up to 10 percent throughout 2024. “Although the government relaxed some measures, the property market is not responding because of the high interest rates,” Jeong said.