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Beware on risk with the increase of interest rate

A gist of the blog:

The US Federal Reserve’s Open Market Committee is going to hold a meeting session this week and the market is expecting another round of interest rate hike thereafter, which will be the eighth increase in interest rate since the end of 2015. Considering the trend of interest rate in Hong Kong over the last few months, the odds for Hong Kong banks to follow suit and increase the prime rate stand high, which will be the first hike of prime rate ever since 2006. The extremely low interest rate environment over more than a decade is coming to an end soon. Coupled with a number of unfavourable and uncertain factors ahead in the near future, it is important for us to well manage the risks.

In fact, after the two earlier interest rate hikes by the US this year, the HIBOR in Hong Kong has already been increased. Many of those who are making payments on mortgage should have felt the burden led by the rate increase. The current flat prices of residential properties in Hong Kong have surged ahead of the affordability of the general public. According to some market figures, the property market has shown signs of cooling over the last few weeks with both prices and volume of transactions falling. We have to stay alert to the risk of possible downturn of the property market and manage our risk vigilantly.