U.S. interest rate hike｜Yu Weiwen: The bad debt rate of banks has risen but it is controllable, urging citizens to be careful about mortgage risks

The Federal Reserve announced to raise interest rates by half a percentage point. The Chairman of the Hong Kong Monetary Authority, Yue Weiwen, said that the decision of the United States was in line with market expectations.

For the whole year, the Federal Reserve raised interest rates seven times, totaling 4.25%. He pointed out that the Fed’s statement after the interest rate meeting and the dot plot showed that the US interest rate hike cycle is not over, and the interest rate has peaked or raised, but it will not affect Hong Kong’s monetary and financial Stable, the linked exchange rate system is effective.

Yu Weiwen, President of the Hong Kong Monetary Authority, said that the 0.5% interest rate hike by the Federal Reserve is in line with market expectations, but the rate hike cycle is not yet over. The demand for Hong Kong dollars is expected to continue to rise, Hibor is expected to remain at a high level for a period of time, and bank deposit and loan interest rates will refer to Hibor. Citizens should carefully manage the risk of rising interest rates when making home mortgages and other lending decisions.

He pointed out that the current rate hike cycle in the United States is faster and faster than before. Inflation is the indicator of interest rate hike policy. The rent and service industry inflation are still high. You can pay more attention to the latter, especially the salary level of the service industry, which will determine future interest rate hikes. The range and at what level to stop, the latest Federal Reserve expects the interest rate ceiling to be 5 to 5.25%, which is higher than earlier.

He said that in addition to being affected by interest rates, Hong Kong's economy is also affected by the global economy, including Europe, the United States and the Mainland. It remains to be seen whether the adjustment of epidemic prevention measures in the Mainland will have a positive effect on the Hong Kong economy.

Bank bad debt 1.1% risk controllable

Regarding the real estate market, Yu Weiwen said that rising interest rates will definitely affect the real estate market, but the real estate market is also affected by other factors including the overall economy, real estate and land supply and demand, and unemployment rate.

In terms of high-value mortgages, the fall in property prices will definitely have an impact, but part of the risk will be passed on to the mortgage insurance, not the banking system. Applicants must be self-occupied and have a stable job, and need to pass the stress test. Strong repayment ability.

So far, no bad debts of affected banks have been seen, and the mortgage bad debt rate is currently 0.04%, which is a risk controllable.

He pointed out that as of the end of September, the overall bad debt rate of banks was 1.1%. The economy in the Mainland and Hong Kong is under pressure. The overall bad debt rate may rise slightly, but it is still quite low compared to other countries and historical levels.

Regarding stress test requirements, the HKMA will closely monitor changes in interest rates and property market cycles, and make corresponding adjustments.