Prospects of first rate hike in 11 years loom for Hong Kong

Bloomberg says rising interbank rates are paving the way for prime rate hikes.

According to a Bloomberg report, crunch the math behind Hong Kong’s mortgage payments, and you’ll spot signs of a potential hike in a rate that’s key for the housing market.

"That’s the prime rate, which is individually set by banks. This is how home loans offered by banks commonly work in Hong Kong: you pay a floating rate that’s equal to a spread on top of the one-month interbank rate known as Hibor, but that payment is capped by a rate that’s equal to the prime rate minus a spread. What’s happening now is that as Hibor surged, the floating rate is starting to run into the cap, giving banks the incentive to raise the prime rate for the first time since 2006," Bloomberg said.

Read the full report here.