HSBC and DBS Hong Kong Maintain Rates Amid Awaited Borrowing-Cost Relief

Hong Kong's largest note-issuing bank, HSBC, and DBS Hong Kong have opted to keep their key lending and deposit rates unchanged. This decision means that mortgage borrowers and businesses will continue to face high borrowing costs without immediate relief.

HSBC confirmed that it will maintain its prime lending rate at 5.875%, alongside paying 0.875% per annum for savings deposits over HK$5,000, with no interest for deposits below that threshold. Similarly, DBS Hong Kong announced it will keep its prime rate steady at 6%, with savings deposit rates ranging from 0.23% to 0.75%, depending on the amount.

The Hong Kong Monetary Authority (HKMA) also chose to hold Hong Kong’s base rate unchanged at 5.75%, in line with the recent decision of the US Federal Reserve to maintain current interest levels. This decision marks the seventh consecutive time that HKMA has mirrored the Fed’s actions, maintaining the linked exchange rate system that pegs the Hong Kong dollar to the US dollar since 1983.

Despite expectations for potential rate cuts starting in September, the HKMA cautioned that high interest rates could persist for an extended period. Hong Kong's banks had previously raised their prime rates five times between September 2022 and July 2023, totaling 87.5 basis points, reaching levels not seen since 2007.

Ryan Lam Chun-wang, Hong Kong head of research at Shanghai Commercial Bank, commented, "If the data allows, the US Fed will deliver rate cuts probably in September. 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 adjusts its official base rate in alignment with the Fed, commercial banks in Hong Kong retain discretion over when to adjust their prime rates. Typically, they do not immediately follow the US rate changes, preferring to wait for the impact on the local interbank rate to materialize over a few months.

By fLEXI tEAM