HSBC Lowers Prime Rate, Impacting Hong Kong's Economy

HSBC, the largest commercial bank in Hong Kong, has made a significant decision to reduce its prime lending rate for the second time this year. This rate cut is expected to ease borrowing costs for both consumers and businesses within the region.

Starting Monday, the bank will lower its prime rate by 25 basis points, bringing it down to 5.375 percent. In addition, the savings rate will also be decreased by the same margin to 0.375 percent on deposits exceeding HK$5,000 (approximately US$640). For smaller deposits below this amount, HSBC will maintain a zero interest rate.

The Bank of China’s local branch has also announced that it will match HSBC's new prime rate of 5.375 percent. This move is intended to stay competitive and respond to an anticipated increase in demand for loans among homebuyers.

This latest cut followed the Hong Kong Monetary Authority's decision to lower its base rate from 5.25 percent to 5 percent. The recent Federal Reserve meeting further influenced this decision as the Fed opted to ease its monetary policy for a second time this year.

According to HSBC's Hong Kong CEO, Luanne Lim, “In light of another US rate cut and factors including economic and market conditions, HSBC decided to lower its Hong Kong dollar deposit and lending rates. We will continue to monitor the external environment and local economic outlook, ready to adjust our rates as needed.”

The impact of this prime rate cut means that borrowers will see a reduction in their monthly payment obligations. Specifically, a typical HK$5 million, 30-year mortgage loan priced at prime minus 1.75 percent would result in a monthly payment decrease of approximately HK$709, bringing the total monthly payment down to around HK$22,803, as estimated by local mortgage broker mReferral.

HSBC, rate, economy