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Hibor

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  1. #1

    Join Date
    Feb 2009
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    8,280

    Thanks for this. To sum up what I wrote in the other thread, there is around an 80% chance that US will raise interest rates for the first time since 2006 next Wednesday and I believe with the HKD pegged to the USD this will have an immediate and direct effect on HK rates on Thursday. I think if US raises 0.25%, then HK will raise 0.25% at the same time.

    But now I am thinking what are the differences between prime and hibor mortgages in Hong Kong. I happen to be on a Hibor + 0.7% deal which is a fantastic and effectively means I have been paying between 0.9% and 0.95% interest every month for the last 6 years, as your graph illustrates. But for the first time ever this month, my rate is 0.89%, the lowest I have every experienced over the last 6 years. I thought rates were going up, not down? So whats going on with the hibor rate these days and why is it lower than ever when I have been bracing for it to shoot up?

    So just to speculate, if US raises next week as expected, then those in Hong Kong that have prime based mortgages (the vast majority of people) are going to see rate increases basically pegged with this, whereas those with Hibor based mortgages are 'de-pegged' and no idea whats really going to happen. Is it time now for those on prime mortgages to consider switching to hibor if its possible as part of their mortgage package?

    The other point I speculated about is that I think as soon as rates rise, property prices in HK are going to fall off a cliff. They are already teetering at the edge now and coming down a bit, but this rate rise is probably going to be what pushes it over the edge and I predict a larger drop than any of the cooling measures (foreigner stamp duty, etc) the govt has tried to introduce over the last 6 years. I am bracing for quite a nasty fall. I could be wrong, and I hope so because I'm an owner and want prices to rise forever, however all signs point to a large fall just around the corner. I would sell now if I didn't need somewhere to sleep. Maybe I could sell and sleep in McDonald's every night?


  2. #2

    Join Date
    Oct 2006
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    Hong Kong
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    yeah, I'm on a prime rate plan. There is no option to switch over to Hibor. Am kicking myself several years ago that I didn't get a Hibor plan when they were being offered at Hibor +0.7%. New plans are now Hibor +1.7% capped at Prime - 3.1% (with prime at 5.25%).

    [My prime plan is prime - 2.9% with prime at 5% so effective rate of 2.1%. I guess if US interest rates go up then my effective rate will be 2.35%, which may make me consider moving over to a Hibor rate, even if its +1.7%, if those are still around. But then will Hibor also go up? Anyone's guess. Or I might debate in paying off a huge chunk of my mortgage].

    Last edited by pin; 10-12-2015 at 11:51 AM.

  3. #3

    Join Date
    Oct 2014
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    297

    My background is not finance so my view could be as stupid as any body's.

    My understanding/explanation about the different interest rate between HKD and USD is related to the exchange rate between them. As we know HKD is pegged to USD between 7.75 and 7.85. I remember a couple months ago that the exchange rate is stuck in very low 7.75, sometimes even below 7.75 (I do not know how/why it is allowed). I do not know about it now, because I do not keep monitor it. So, to minimize/compensate for buying HKD/selling USD (which create low HKD to USD exchange rate) the HKD interest rate should be lower then USD's. It would need to be like this until other economy indicators/parameters change. Now, if USD interest rate rise, HKD authority has option to rise interest rate for HKD or not, and how much to rise it. If HKD interest does not rise then there will be selling HKD/buying USD pressure and the HKD/USD exchange rate will rise. The authority has to maintain the exchange rate in the mentioned peg range.

    Is my explanation correct? I would like someone to say it is or it is not. Thanks.


  4. #4

    Join Date
    Oct 2014
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    Thanks TB. I have a brief on it. It says that interest rate is one of the component to use or effected by the link (peg).


  5. #5

    Join Date
    Dec 2013
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    This thread just made me remember the time back in the late 80's/early 90's in the UK when the interest rates went above 15%. Sorry but I can't feel any sadness for people currently paying under 5% and worrying about tiny increases! It went up on one day in the UK by over 2% ... before UK left the monetary system (pre Euro zone).


  6. #6

    Join Date
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    Quote Originally Posted by HK_Katherine:
    This thread just made me remember the time back in the late 80's/early 90's in the UK when the interest rates went above 15%. Sorry but I can't feel any sadness for people currently paying under 5% and worrying about tiny increases! It went up on one day in the UK by over 2% ... before UK left the monetary system (pre Euro zone).
    Horrible time, my mortgage took all my salary.

  7. #7

    Join Date
    Jun 2010
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    2,136
    Quote Originally Posted by pin:
    yeah, I'm on a prime rate plan. There is no option to switch over to Hibor. Am kicking myself several years ago that I didn't get a Hibor plan when they were being offered at Hibor +0.7%. New plans are now Hibor +1.7% capped at Prime - 3.1% (with prime at 5.25%).

    [My prime plan is prime - 2.9% with prime at 5% so effective rate of 2.1%. I guess if US interest rates go up then my effective rate will be 2.35%, which may make me consider moving over to a Hibor rate, even if its +1.7%, if those are still around. But then will Hibor also go up? Anyone's guess. Or I might debate in paying off a huge chunk of my mortgage].
    Don't be. There's a hidden fee in addition to that rate.

  8. #8

    Join Date
    Oct 2014
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    297
    Original Post Deleted
    sell your house to me... at 50% discount?

  9. #9

    Join Date
    Oct 2014
    Posts
    297

    60% discount?

    Haha, I still can not afford it anyway. Just start my 2nd year here, still have long way to be able to purchase property here.


  10. #10

    Join Date
    Jun 2013
    Posts
    345

    Is there anybody doing FOREX trading full time? Do you know what's happening to the HKD?

    This is what I read from Wall Street Journal:

    But sentiment has shifted drastically lately. While traders had expected a 2% appreciation in the Hong Kong dollar at the start of the year, they are now betting on it to weaken to 7.98 a U.S. dollar in 12 months, breaking the peg to the greenback.

    Hong Kong officials “haven’t faced the same type of renminbi depreciation pressure that they may be facing now,” said Alex Wolf, an emerging-market economist at Standard Life Investments, which has $393 billion of assets under management.
    China Fears Rattle Hong Kong Dollar - WSJ

    Seems like this is a repeat of 1997. If there are currency traders with more insight into this, please do share with us