Meridian: Hong Kong dollar interest rates have fallen significantly with limited room for further decline, expected to hover around the 2%-3% range in the first half of the year.

The Federal Reserve's monetary policy meeting has concluded, with the benchmark interest rate remaining in the range of 3.5% to 3.75%. The Federal Reserve's dot plot shows a predicted interest rate cut in 2026, totaling 0.25%. On the Hong Kong side, HSBC has announced that its prime rate (P) will remain unchanged at the current level of 5%. mReferral Mortgage Brokerage Services' Vice President, Cao Deming, stated that the impact of geopolitical issues on inflation still needs to be observed, and it is expected that the Federal Reserve will not start cutting interest rates until the second half of the year. Given that Hong Kong's banking system still has a total surplus of around 53.8 billion Hong Kong dollars, the potential for a significant drop in the Hong Kong dollar prime rate is relatively limited. It is predicted that the prime rate will hover around 2% to 3% in the first half of the year. Cao Deming also mentioned that although the Hong Kong and US interest rates have not fallen, the current new mortgage rates are at reasonable and affordable levels. Currently, three major banks have introduced a fixed interest rate mortgage plan at 2.73% for the first three years, which is 52 basis points lower than the standard new mortgage plans at 3.25%. This indirectly helps customers reduce interest rates sooner. Furthermore, Hong Kong property prices are gradually stabilizing, with increased trading volumes, boosting citizens' confidence in property ownership and investment. It is anticipated that the Hong Kong property market will continue to see a rise in both prices and transaction volumes this year. Some banks have recently become more positive towards mortgage business, actively seeking mortgage business throughout the year, offering various promotions and increasing mortgage rebates to attract high-quality clients. It is expected that the mortgage market will follow the stable upward trend in the property market this year. On the other hand, the one-month Hong Kong Interbank Offered Rate (HIBOR) is currently at 2.05446%, dropping for the second consecutive day. Cao Deming mentioned that the potential for a significant drop in the Hong Kong dollar prime rate is relatively limited, and it is predicted that the prime rate will hover around 2% to 3% in the first half of the year. Owners with HIBOR-based mortgages will still need to budget for a cap rate of 3.25%. The standard new HIBOR-based mortgage plans are typically HIBOR + 1.3%, and the actual interest rates and monthly mortgage payments can only decrease if there is further inflow of funds into the Hong Kong banking system, causing the HIBOR to drop below 1.95%. Cao Deming suggests that potential property buyers looking to save on interest should consider the fixed interest rate mortgage plans offered by the three major banks, with a rate of 2.73% for the first three years.