# Pricing benchmarks for premium financing: HIBOR, Prime, cost of funds and fixed rates

> How Hong Kong premium financing is priced off HIBOR, Prime or cost of funds, plus fixed-rate windows: margins, floors, default rates, Nov 2026 levels.

- URL: https://premiumfinance.hk/pricing-benchmarks/
- Author: Premium Finance Practice Editorial (https://premiumfinance.hk/about/)
- Reviewed by: Premium Finance Practice Editorial Editorial Board
- Published: 2026-11-04
- Updated: 2026-11-04
- Language: en

## Key takeaways

- HKAB published HKD HIBOR fixings at 11:15 a.m. on 3 Nov 2026 of 2.34% overnight, 2.68% one-month, 3.21% three-month and 3.91% twelve-month; the fixing is a trimmed mean of quotes from a panel of 20 banks.
- Major banks' HKD Prime stood at 5.00% (two banks) and 5.25% (one bank) on 29 Oct 2026, unchanged since a 0.125-point cut in October 2025; the HKMA Base Rate was 4.25% after the Federal Reserve's 29 Oct 2026 decision.
- Published premium financing margins in late 2026 include 1-month HIBOR plus 0.75% to 2% with a 0.75% floor, 1-month HIBOR plus 0.95% to 1.35% by loan size, Prime minus 0.4% to 0.8%, and a 3-month HIBOR basis at another bank.
- Some facility letters let the bank substitute its own cost of funds; since 16 Oct 2023 the HKMA requires every building block of the rate, including that discretion, to be shown with equal prominence.
- Fixed-rate periods are offered in application windows (one bank quoted 4.3% for three or five years for applications from 1 to 15 Nov 2026) and revert to floating when the period ends; default rates run from Prime plus 4.75% to 1-month HIBOR plus 6%.

A premium financing facility in Hong Kong is priced as a benchmark plus or minus a margin. The benchmark is one of three: the Hong Kong Interbank Offered Rate (HIBOR) for a stated tenor, the bank's Prime or best lending rate, or the bank's own cost of funds. Fixed rates exist but only for a defined period and usually only in an application window. The margin is fixed for the life of the facility unless the bank re-prices it at review; the benchmark moves with the market. Everything a borrower pays is therefore the sum of a number they cannot control and a number they negotiated once.

## HIBOR: what it is and where it stands

HIBOR is the rate at which banks in Hong Kong lend Hong Kong dollars to one another. The Hong Kong Association of Banks (HKAB) owns the HKD Interest Settlement Rates and publishes them every business day at 11:15 a.m. for tenors from overnight to twelve months. The fixing is a trimmed mean: quotes are collected from a panel of 20 designated banks, the three highest and three lowest are discarded, and the remaining quotes are averaged. The fixings on 3 November 2026 were:

| Tenor | HKD Interest Settlement Rate, 3 Nov 2026 |
|---|---|
| Overnight | 2.34333% |
| 1 week | 2.40000% |
| 2 weeks | 2.52893% |
| 1 month | 2.68000% |
| 2 months | 3.10071% |
| 3 months | 3.21399% |
| 6 months | 3.42179% |
| 12 months | 3.90685% |

Source: HKAB, as at 11:15 a.m. on 3 November 2026.

Premium financing uses the 1-month tenor most often and the 3-month tenor at some banks. HIBOR is not administered by the HKMA and is not capped: one bank's key facts statement states that the interest rate "is not subject to a cap and thus may subject to higher interest rate risk" and discloses that the highest 1-month HIBOR in the previous three years was 5.65946% and the highest overnight HIBOR 6.50357%. HIBOR also moves for reasons unrelated to US policy rates, including seasonal and IPO-related tightness in Hong Kong dollar liquidity, so a borrower on a 1-month basis can see the rate change materially between consecutive resets.

## Prime: the best lending rate

Prime, or the best lending rate, is set by each bank for itself and changes infrequently, usually in step with moves in the HKMA Base Rate, which under the Linked Exchange Rate System follows the US federal funds target. On 29 October 2026, after the Federal Reserve held its target range, two of Hong Kong's three largest banks kept Prime at 5.00% and the third at 5.25%; these levels have stood since October 2025, when banks cut by 0.125 percentage points. The HKMA Base Rate was reported at 4.25% on the same day. One bank's key facts statement discloses that the highest Prime in the three years to the end of 2025 was 5.875%.

Prime-based pricing is quoted as Prime minus a margin. One bank quotes Prime minus 0.4% for loans under HK$1 million, minus 0.6% for HK$1 million to HK$5 million and minus 0.8% for HK$5 million and above, with the rate re-fixed daily. At Prime of 5.00% that is an all-in rate of 4.20% to 4.60%, compared with 3.63% to 4.03% on the same bank's 1-month HIBOR alternative at the 3 November fixing. The Prime basis is smoother; the HIBOR basis is cheaper when interbank rates are low and dearer when they spike.

## Cost of funds: the bank's own number

Some facility letters allow the bank to price off its own cost of funds (COF) instead of, or in priority to, a published benchmark. The COF is determined by the bank, re-fixed each interest period, and not published. One bank describes its pricing as "HIBOR or Cost of Funds plus a margin" and illustrates a COF of 4.5% plus a 1.7% margin, giving 6.2% a year; another states that "some banks may also adopt their own cost of fund to determine the interest rate of the loan", which is the HKMA's own warning in its consumer material.

The HKMA acted on this in 2023. After interest rates rose in the second half of 2022, some banks relied on clauses in their loan agreements to switch facilities from HIBOR-based or Prime-based rates to COF without the change having been set out clearly in product documents. The HKMA circular of 16 October 2023 requires banks to draw a customer's attention to every building block of the rate when an application is received, to state explicitly where the bank has discretion to adopt its COF (for example when it is higher than the benchmark rate), and to show the three possible scenarios of COF, HIBOR-based and Prime-based rates with equal prominence in the same part of the facility letter. Banks had three months to apply this to new facilities.

## Margins, floors and the all-in rate

The margin is the bank's spread over the benchmark. Published premium financing margins in late 2026 cluster between 0.75% and 2% over 1-month HIBOR, varying by relationship tier and loan size; one bank quotes 1-month HIBOR plus 0.75% to 2% with a minimum all-in rate of 0.75%, another 1-month HIBOR plus 0.95% to 1.35% depending on whether the loan is below HK$1 million, between HK$1 million and HK$5 million, or above. A floor protects the bank if HIBOR falls towards zero, as it did in 2020 and 2021. The margin on a fixed-rate facility is embedded in the fixed rate.

| Basis | Example published pricing (late 2026) | All-in at 3 Nov 2026 benchmark |
|---|---|---|
| 1-month HIBOR plus margin | HIBOR + 0.75% to 2%, floor 0.75% | 3.43% to 4.68% |
| 1-month HIBOR plus margin, by size | HIBOR + 1.35% / 1.15% / 0.95% | 4.03% / 3.83% / 3.63% |
| Prime minus margin, by size | Prime − 0.4% / 0.6% / 0.8% | 4.60% / 4.40% / 4.20% at Prime 5.00% |
| Cost of funds plus margin | COF + 1.7% (illustration) | Depends on the bank's COF |
| Fixed | 4.3% for 3 or 5 years (applications 1–15 Nov 2026) | 4.30% during the fixed period |

These are arithmetic on published terms, not quotations; a bank's offer to a given applicant may differ.

## Fixed-rate windows

Fixed rates are offered as promotions with an application window and are indicative until the loan is processed. One bank's key facts statement dated 16 October 2026 quotes 4.3% fixed for the first three or five years of a ten-year interest-only loan, available for applications submitted between 1 and 15 November 2026, and states that submitting an application does not lock the rate. After the fixed period the loan reverts to 1-month HIBOR plus 0.75% to 2%. A prepayment charge of 2% applies to principal repaid in the first years of the fixed period. The trade is explicit: certainty for three to five years, a reversion risk afterwards, and a cost to leave early. The [interest reset](/interest-reset/) page covers what happens at the end of the fixed period.

## Default rates, fees and day counts

Default or overdue interest applies to late payments and to balances above the credit limit. Published levels include Prime plus 4.75% or overnight HIBOR plus 5% for overdue amounts, Prime plus 6% for unauthorised overdrafts, and 1-month HIBOR plus 6% on principal not repaid at the end of the tenor. Fees are modest but should be listed: HK$1,000 per change of loan terms or per prepayment at one bank, a 0.3% administration fee on a fixed-rate loan at another, and handling fees of zero at a third. Interest is calculated on actual days over 365 (366 in a leap year) for HKD loans and actual over 360 for USD loans, which makes a USD rate slightly more expensive than the same nominal HKD rate.

## USD facilities

A USD policy can be financed in USD. Pricing is off the bank's USD best lending rate minus a margin (one bank quotes USD best lending rate minus 1.5%, floor 0.75%) or a USD benchmark plus margin. Financing in USD removes the exchange-rate risk between loan and collateral that the IFS-PF warns about, but the borrower still needs USD to pay interest, and a USD loan at some banks carries a higher LTV than an HKD loan. The [compare](/compare/) page sets HKD HIBOR, HKD Prime, USD and fixed facilities side by side.

## Sources and dates

- HKAB HKD Interest Settlement Rates (HIBOR), as at 11:15 a.m. 3 Nov 2026 — The Hong Kong Association of Banks (HKAB) 2026-11-03 https://www.hkab.org.hk/en/rates/hibor
- Interbank Interest Rate Fixing Mechanism (inSight: panel of 20 banks, trimmed mean) — Hong Kong Monetary Authority (HKMA) 2012-08-03 https://www.hkma.gov.hk/eng/news-and-media/insight/2012/08/20120803/
- Hong Kong major lenders keep prime rate unchanged (HSBC and BOCHK 5%, Standard Chartered 5.25%; 1-month HIBOR 2.71494%) — The Standard 2026-10-29 https://www.thestandard.com.hk/finance/article/346890/Hong-Kong-major-lenders-keep-prime-rate-unchanged
- Hong Kong holds base rate at 4.25% after US Federal Reserve decision — South China Morning Post 2026-10-29 https://www.scmp.com/business/banking-finance/article/3372495/hong-kong-holds-base-rate-425-after-us-federal-reserve-decision
- Key Facts Statement for Revolving Credit Facility – Premium Financing & Policy Collateralization (Oct 2026) — Hang Seng Bank Limited 2026-10 https://cms.hangseng.com/cms/pws/files/PF_KFS.pdf
- Key Facts Statement for Insurance Premium Financing (fixed rate, 16 Oct 2026) and product page — The Hongkong and Shanghai Banking Corporation Limited 2026-10-16 https://www.hsbc.com.hk/wealth-financing/products/premium-financing/
- Premium Financing & Policy Financing (HIBOR or cost of funds plus margin; example at COF 4.5% plus 1.7%) — OCBC Bank (Hong Kong) Limited 2026-11 https://www.ocbc.com.hk/premier-banking/en/premium-financing.html
- Insurance Financing Service (3-month HIBOR plus a pre-determined rate) — China Construction Bank (Asia) Corporation Limited 2026-11 https://www.asia.ccb.com/hongkong/personal/loans/insurance_financing.html
- Premium Financing Activities for Insurance Policies (circular on interest rate disclosure, Ref B1/15C) — Hong Kong Monetary Authority (HKMA) 2023-10-16 https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2023/20231016e1.pdf

---

This site is run by Premium Finance Practice Editorial, an independent insurance information site providing general education and comparison. It is not an insurer, licensed insurance intermediary or bank, sells no insurance product and accepts no application. Content has not been reviewed, approved or endorsed by the Insurance Authority (IA). For applications, quotations and policy servicing, consult a Hong Kong insurer or licensed insurance intermediary.