The percentage of monthly household income used for mortgage repayments in Hong Kong could reach 60.1%, the least affordable level since 1998, if mortgage rates rise to 3.5%, according to Bloomberg Intelligence.

That could deter buyers unless household incomes surge or home prices decline further, Bloomberg analysts Patrick Wong and Francis Chan wrote in a note on Thursday. For the ratio to remain at about 56%, current home prices need drop by at least 10%.

HSBC Holdings Plc, Hong Kong’s biggest lender, boosted its prime rate by 12.5 basis points to 5.125%, according to a statement on Thursday. Other lenders are expected to follow, bumping up borrowing costs for property and businesses as the hub is struggling to revive its economy amid Covid restrictions and an exodus of talent.

Hong Kong Monetary Authority chief executive Eddie Yue told reporters on Thursday that banks would “very likely” raise their deposit and lending rates by the end of the year as US interest rates continue to spike. HKMA lifted its base rate by 75 basis points to 3.5%, hours after the Fed’s move of the same magnitude.