For some time the fixings on my floating rate mortgages (at least the HK$ ones) have been hovering either just above or just below 5% pa.
With the so called credit crunch making headlines around the world, one would normally expect interest rates to rise, especially in the short duration end of the yield curve (which is what is used to determine the interest rates on my mortgages). So far this hasn't happened. In fact my most recent fixing showed a slight decline in the interest rate I am paying.
In searching for an explanation, I came up with the following possibilities:
1. the HKMA has successfully supported the market, keeping interest rate rises in check;
2. demand for money has slowed;
3. the credit crunch is confined to sectors of the market which do not (or at least do not yet) affect Hong Kong interest rates.
I have no idea which (if any) is the correct explanation. If I had to guess I would say #1 and #3 are the more likely explanations. This leaves open the possibility that if the credit crunch continues to expand that I may face higher interest rates at some point in the future. Against this it can be argued that any sign of a meaningful slowdown in economic activity is likely to see interest rate cuts. Accordingly, I have concluded that even if interest rates do increase, it is unlikely to be by much.