Zhongyuan Mortgage: Hong Kong rate cut cycle may start as early as the end of the year, expected to boost confidence in the property market

Zhitong
2024.08.01 06:30
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Wang Meifeng, Managing Director of Central Mortgage, stated that the interest rate cut cycle in Hong Kong may start as early as the end of the year, which is expected to boost confidence in the property market. It is expected that the United States will start cutting interest rates in September, and the Hong Kong dollar interbank rates are expected to fall in the fourth quarter, easing the funding cost pressure on banks and enterprises, and enhancing banks' enthusiasm for mortgage lending. Wang Meifeng believes that if the United States cuts interest rates in September, the Hong Kong dollar interbank rates will gradually decline, which will have a positive impact on the Hong Kong property market

According to the Wise Finance APP, in the early morning of August 1st Beijing time, the Federal Reserve announced that it would maintain the target range for the federal funds rate at 5.25% to 5.50%, in line with market expectations, marking the 8th consecutive meeting of keeping rates unchanged. Wang Meifeng, Managing Director of Zhongyuan Mortgage, stated that the current key interest rate in Hong Kong is at 4.125%. There is a chance that the rate cut cycle in Hong Kong may start from the end of this year to the first quarter of next year, potentially bringing the interest rate in Hong Kong down to 4% or below. The likelihood of the U.S. starting a rate cut in September has increased, and the Hong Kong Interbank Offered Rate (HIBOR) is expected to decline in the fourth quarter, reducing the cost pressure on banks and corporate funds, which will help boost the enthusiasm for bank mortgage loans. It is expected to increase confidence in the Hong Kong property market, attracting more buyers at lower prices and driving the market sentiment.

Wang Meifeng pointed out that the recent drop in the U.S. inflation rate to 3% is better than expected. The decrease in the U.S. inflation rate and the slowdown in labor market development indicate an increased chance of a rate cut in September, with expectations of two rate cuts in the U.S. within the year, each by 0.25%. The Federal Reserve emphasized that the current interest rate policy depends on whether the trend of falling inflation, labor market performance, and economic conditions continue. If the upcoming inflation figures continue to improve, it is believed that it will support the U.S. to start a rate cut in September.

She believes that due to the smaller increase in Hong Kong interest rates during the rate hike cycle compared to the U.S. (cumulative increase of 5.25% for the Federal Reserve and only 0.875% for Hong Kong), if the U.S. cuts rates in September, the Hong Kong Interbank Offered Rate (HIBOR) will gradually decline first. After the rate falls to a certain extent, the most favorable rate in Hong Kong (Prime Rate) will also decrease accordingly

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