Hong Kong Banks Follow Fed’s Lead: Prime Rate Cuts Promise Monthly Savings for Mortgage Borrowers and Boost to Local Economy

Banks in Hong Kong reduce prime rates by 0.25%, halfway matching the Federal Reserve's assertive reduction. For a standard loan of HK$5 million over 30 years, priced at prime minus 1.75%, a 0.25% reduction in prime rates will result in monthly savings of HK$720 for those with mortgages.

Five significant commercial banks in Hong Kong have decreased their prime rates for the first time in nearly five years. This follows the local financial regulator's move to initiate a cycle of rate cuts, similar to the actions of the US Federal Reserve.

The reductions result in financial benefits for individuals who link their loans to prime rates. For an average loan of HK$5 million over 30 years, priced at prime minus 1.75 per cent, the decrease brings the mortgage rate down to 3.875 per cent and reduces the monthly payment by HK$720 to HK$23,512, says mReferral, a domestic mortgage brokerage firm.

Financial Secretary of Hong Kong, Paul Chan Mo-po, stated that the reduction in the rate will have a beneficial impact on local businesses and aid the capital markets. He also anticipates a weakening of the local currency which could draw in tourists and bolster consumer spending in retail and food service sectors.

Investors celebrated the long-anticipated reduction in rates, causing a 2 per cent surge in the crucial Hang Seng Index, marking its most significant single-day percentage increase since July 31.