Hong Kong homeowners should be relaxed Thursday since they could keep their mortgagee payment unchanged despite a US interest rate hike on Tuesday night.

Major Hong Kong banks announced Wednesday that they will keep the prime interest rate unchanged although they adopt a little bit different prime rate. The giant HSBC, Hang Seng bank, and the Bankof China (Hong Kong) kept their prime lending and saving rate at 5.25 percent and 0.25 percent. While the Standard Chartered Bank, Bank of East Asia and DBS Bank (Hong Kong) left its prime rate at 5.5 percent.

According to Joseph Yam, chief executive of the Hong Kong Monetary Authority (HKMA), in the past 10 months, Hong Kong banks already adopted different interest rate policy with US banks, and the interest rate gap between Hong Kong and the United States willexit at least for a short period.

Ruby Chan, spokeswoman of HSBC, said HSBC does not feel the need to raise the interest rate for the time being due to ample liquidity of bank system and relatively low overnight interbank lending rate.

The aggregated balance of local bank system remains relatively high at 3.9 billion HK dollars (500 million US dollars) and the overnight interbank lending rate was kept low for the recent two weeks.

Theoretically, Hong Kong rates closely track those in the United States due to the linked exchange rate system. The spokeswoman of HSBC said although the HKMA did raise its base ratefor overnight lending by a quarter point to 4.5 percent Wednesday after the US Federal Open Market Committee raised its short term rate 25 basis points to 2.75 percent, its eighth consecutive increase, Hong Kong banks could decide its own interest rate policy out of its own commercial interest.

Analysts say Hong Kong banks could adjust their interest rate decision according to the market condition. If capital keeps flowing into the Hong Kong market, they might reduce interest ratedespite a US rate hike and if the capital flows out of the market,they might raise the rate.

However, since the interest rate gap between Hong Kong and US markets has widened to 1.5 percent, bankers say that Hong Kong might ultimately have to follow the US rate hikes since arbitrage opportunities arise under a pegged currency system.

"It's just a matter of time" that the interest rate gap will narrow down, said Stanley Wong, director and deputy general manager of ICBC (Hong Kong).

Source: Xinhua